corporate governance

Transcription

MA JOR AWARDS AND DI STI NCTI O NS
AWA RDE D TO ORLE N GRO UP CO M PANI ES I N 2012
PKN ORLEN
» A ‘Fuel Industry Leader in Responsible Business 2012’ award, granted
» For the sixth time in a row, PKN ORLEN secured top spot in the prestigious ‘Most Valuable Polish Brand’ MARQA ranking, compiled
by the Rzeczpospolita daily newspaper. The ORLEN brand was
valued at over PLN 3.8bn, while its BLISKA brand ranked 15th,
valued at PLN 737 million.
in a contest organised by Employers of Poland.
» Top spot in the CSR Reports 2011 competition for having the best
Corporate Social Responsibility report.
» Distinctions granted in recognition of the multi-year process and
fruitful cooperation to bring the idea behind the Responsible Care
» PKN ORLEN secured first place in the EMEA region, in the Refining
Programme to life.
& Marketing category of the Platts Top 250 Global Energy Company
» ‘Positivist of the Year 2011’ title in the Science and Education
Ranking, which lists the largest refining and energy sector companies
category, for our Poczujchemię.pl website, an interactive tool for
around the world.
learning chemistry.
» We received a special award for using innovative, Internet-based
» The title of ‘Educational Initiative of the Year’, granted to the Com-
communication tools in Company investor relations in the fifth
pany for the second time by the Ministry of National Education and
edition of the ‘Golden Website’ competition for listed companies.
the Głos Nauczycielski educational weekly magazine, for our Lekcja
» PKN ORLEN ranked first in the Fuels, Energy and Production category
of the seventh edition of the Responsible Companies ranking, and
fifth overall.
Chemii (‘The Chemistry Lesson’) educational initiative.
» A prestigious ‘Patron of Polish Sport’ award, received after a survey
conducted by CANAL+ and the Polish Chamber of Sports.
» Top spot in the seventh edition of the Pillars of Polish Economy ranking, which lists major employers and supporters of entrepreneurship
involved in initiatives for local communities. PKN ORLEN was awarded
for its contribution to the development of the Warsaw Province.
» In the service Station Category, we were awarded the title of ‘Most
Trusted Brand’, in the largest European consumer survey, organised
» ‘Web Page of 2012’ for www.vervastreetracing.pl, in the Sports and
Recreation category of the Webstarfestival contest.
UNIPETROL
» Award in the Service Station 2012 category of the ‘PETROLawards
12’ contest for Benzina, s.r.o., a company of the UNIPETROL Group.
» Award in the Project of the Year category of the ‘PETROLawards
by Reader’s Digest.
» A ‘Service Quality Emblem 2012’ in the Service Station category,
for prompt, professional and friendly service, as well as for good
customer relations. PKN ORLEN also secured a place among the ‘Top
100 Customer Friendly Companies in Poland’.
» PKN ORLEN continues to be part of the Warsaw Stock Exchange’s
elite Respect Index of socially responsible companies.
» A ‘Top Employers Polska 2012’ certificate issued by the Corporate
Research Foundation (CRF), an independent international organisation, in recognition of the very good working conditions offered
to employees.
12’ contest for Česká Rafinérská, a UNIPETROL Group company, for
the reconstruction of a railway loading ramp.
ORLEN Lietuva
» Eighth place in the ‘Coface CEE TOP 500’ ranking.
» ‘Lithuanian Exporter of the Year 2012’ title, granted by the Lithuanian
Industry Confederation (LPK).
» Eighth place in CV Market’s Best Employer ranking.
» Chosen ‘Most Popular Polish Brand on The Lithuanian Market’
by the Embassy of the Republic of Poland in Lithuania.
» ‘Trustworthy Employer’ title in the Production Industry category,
for exemplary employee and social policy practices.
ORLEN Deutschland
» First place in the ‘Most Sought-after Employers According to Managers
» Second place in a ranking carried out by the German Institute for
and Professionals in 2012’ ranking in the Energy, Fuels and Gas
Service Quality, for the Star brand service stations, in recognition
category.
of their high service quality.
» Second prize in the nationwide ‘Improvement of Working Conditions’
» ORLEN Deutschland again among the three best companies in terms
competition, in the Technical and Organisational Solutions in Practice
of number of sales, in a list of the largest companies in the state
category, in recognition for our ‘Report a Safety Risk’ programme.
of Schleswig-Holstein.
» A ‘European Ecological Award’ in the 13 edition of the National
th
Environmental Council’s ‘Environment-Friendly’ contest.
» In recognition of having met high standards of social responsibility
in business, PKN ORLEN was awarded a Silver CSR Leaf; PKN ORLEN
was also awarded elite status in a poll run by the Polityka weekly
magazine.
» Star brand service stations awarded in the ‘German Servicepreis
2013’ ranking by the German Institute for Service Quality.
ANWIL
ORLEN Upstream
» Title of ‘PILLAR OF THE POLISH ECONOMY’ in the ‘Best Companies
» Certificate of compliance with the requirements of the PN-N 18001:2004
in the Provinces of Gdańsk, Olsztyn and Bydgoszcz’ ranking, prepared
standard for the supervision and execution of hydrocarbon explo-
by the Puls Biznesu daily and the leading research agency TNS Pentor.
ration and production projects, issued by the Polish Foreign Trade
» ‘2012 Ambassador of the Polish Economy’ in the European Brand
category, awarded by the Business Centre Club under the honorary
patronage of the Polish Minister of Foreign Affairs.
» European AEO (Authorised Economic Operator) Certificate.
» Product Stewardship Programme certificate extended until 2014.
ORLEN OIL
» ‘Quality of the Year 2011’ for the Platinum oil family.
» ‘Reliable Employer of the Year 2011’.
» ‘2012 Ambassador of the Polish Economy’ in the Exporter category,
awarded by the Business Centre Club under the honorary patronage
of the Polish Minister of Foreign Affairs.
Chamber.
ORLEN Ochrona
» A promotional ‘Business Cheetah 2012’ title granted by Magazyn
Przedsiębiorców Europejska Firma (“Magazine for Entrepreneurs –
European Firm”).
ORLEN Laboratorium
» A ‘Reliable Company’ certificate in recognition of the timely settlement of all liabilities and respect for the natural environment and
consumer rights. The Company has already been awarded seven
times in this programme.
» Award in the ‘Reliable in Business 2012’ programme.
» ‘Top Brand of the Year 2012’ for Platinum ORLEN OIL products
» Research Laboratory Accreditation Certificate No. AB 484, granted
in the Engine Oil category of the nationwide Consumer’s Laurel
» An ‘Information Security Management System’ Certificate of Com-
review of consumer and customer preferences.
» Award in the ‘Label Awards 2012’ contest for the Platinum MaxExpert
XD 5W label.
» ‘Najwyższa Jakość Quality International 2012’ badge.
» Certificate and Twentieth Anniversary Medal in the ‘Teraz Polska’
contest.
» A ‘European Medal 2012’ in the twenty-third edition of the European
Medal, for Platinum engine oils.
» A ‘Reliable Company’ certificate in recognition of the timely settlement
of all liabilities and respect for the natural environment and consumer
rights.
» A ‘2011 Golden Idea’ award for the Platinum MaxExpert advert
in the TV Product and Service Category of the Idea Awards contest.
ORLEN Asfalt
by the Polish Centre for Accreditation, extended for another four years.
pliance with the PN-ISO/IEC 27001:2007 standard, issued by TUV
NORD Polska Sp. z o.o.
Rafineria Trzebinia
» Letter of Congratulation and ‘Outstanding Exporter of the Year 2012’
medal for Fabryka Parafin Naftowax, a company of the Rafineria
Trzebinia Group.
ORLEN Centrum Serwisowe
» GRAND PRIX and ‘Product of the Year 2012’ main award in the Fuel
Logistics and Distribution category at the 19th International Petrol
Station Fair 2012.
Rafineria Nafty Jedlicze
» The ‘Pantheon of Polish Ecology’ title, granted at the International
» A ‘Business Reliability Certificate’, granted to the most stable
Trade Fair of Environmental Protection POLEKO 2012 for the ‘Rafineria
and most financially reliable companies according to D&B Poland.
Nafty Jedlicze S.A. – waste oil recycling – from waste to product’
» A gold medal for ‘Best Stand’ at the Expo Traffic 2012 Romanian
industrial fair.
ORLEN Eko
» A ‘Business Gazelle’ title in the ranking of Polish companies demonstrating the strongest growth.
» ‘Partner of Poland’s Environment’ in the thirteenth edition of the natio
nal ‘Environment-Friendly’ competition.
project.
ORLEN PetroCentrum
» A ‘Forbes Diamond 2012’ granted by Forbes monthly magazine.
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Annual report
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CONTENTS
P K N OR LE N A N N U A L R E P OR T 2 0 1 2
» PKN ORLEN SUPERVISORY BOARD................................................................................................................................. 5
» LETTER FROM THE CHAIRMAN OF THE SUPERVISORY BOARD OF PKN ORLEN........................................................ 6
» PKN ORLEN MANAGEMENT BOARD............................................................................................................................... 8
» LETTER FROM THE CEO AND PRESIDENT OF THE MANAGEMENT BOARD OF PKN ORLEN................................... 11
» WHO WE ARE................................................................................................................................................................. 14
Our core values......................................................................................................................................................................... 16
The ORLEN Group on the capital market.............................................................................................................................. 18
The ORLEN brand..................................................................................................................................................................... 19
Corporate Social Responsibility (CSR)..................................................................................................................................... 20
Sponsorship............................................................................................................................................................................... 21
Company projects..................................................................................................................................................................... 22
» ORLEN GROUP STRATEGY............................................................................................................................................. 24
Revision of the ORLEN Group Strategy for 2013-2017......................................................................................................... 26
Refinery................................................................................................................................................................................... 27
Petrochemicals......................................................................................................................................................................... 27
Retail....................................................................................................................................................................................... 27
Power generation.................................................................................................................................................................... 28
Upstream................................................................................................................................................................................. 28
» BUSINESS OVERVIEW..................................................................................................................................................... 30
Refinery..................................................................................................................................................................................... 32
Bitumens.................................................................................................................................................................................... 36
Oils............................................................................................................................................................................................. 37
Petrochemicals.......................................................................................................................................................................... 39
Petrochemical products............................................................................................................................................................ 40
Plastics..................................................................................................................................................................................... 42
Chemicals................................................................................................................................................................................... 43
» SALES.............................................................................................................................................................................. 44
Logistics..................................................................................................................................................................................... 46
Mandatory stocks.................................................................................................................................................................... 46
Pipelines.................................................................................................................................................................................. 47
Fuel terminals.......................................................................................................................................................................... 48
Rail transport........................................................................................................................................................................... 49
Road transport........................................................................................................................................................................ 49
Sea cargo handling.................................................................................................................................................................. 49
Wholesale.................................................................................................................................................................................. 50
Fuels........................................................................................................................................................................................ 51
Other refining products........................................................................................................................................................... 56
Retail.......................................................................................................................................................................................... 56
» POWER GENERATION..................................................................................................................................................... 62
» PRODUCTION (UPSTREAM)............................................................................................................................................ 66
Unconventional hydrocarbon projects.................................................................................................................................... 69
Conventional hydrocarbon projects........................................................................................................................................ 70
» THE ORLEN GROUP........................................................................................................................................................ 72
Shareholding changes in 2012................................................................................................................................................ 74
Outlook for the coming years................................................................................................................................................. 74
» EMPLOYEES.................................................................................................................................................................... 76
Workforce structure................................................................................................................................................................. 78
Human resources policy and programmes............................................................................................................................. 78
» PROTECTION OF THE NATURAL ENVIRONMENT......................................................................................................... 80
» MATERIAL MARKET RISK FACTORS.............................................................................................................................. 88
» CORPORATE GOVERNANCE........................................................................................................................................... 94
» CONSOLIDATED FINANCIAL STATEMENTS................................................................................................................. 120
Qualified Auditor’s Report..................................................................................................................................................... 122
» CONTACT DATA............................................................................................................................................................. 220
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PK N ORLEN S UPE RVIS O RY BO ARD
MACIEJ MATACZYŃSKI
Chairman of the Supervisory Board
LESZEK JERZY PAWŁOWICZ
Deputy Chairman of the Supervisory Board,
Independent Member of the Supervisory Board
CEZARY BANASIŃSKI
PAWEŁ BIAŁEK
Member of the Supervisory Board
GRZEGORZ BOROWIEC
ARTUR GABOR
MICHAŁ GOŁĘBIOWSKI
ANGELINA SAROTA
Secretary of the Supervisory Board
Composition of the PKN ORLEN Supervisory Board as at May 31st 2013.
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LETTER FROM THE CH AI RM AN
OF THE SUP ERVISORY BO ARD O F PKN O RL EN
DEAR LADIES AND GENTLEMEN,
In 2012, the most important event for PKN ORLEN was the announcement of the ORLEN Group’s Development Strategy for 2013-2017.
The Strategy provides for an ambitious investment programme and
the readiness to pay dividend, with debt remaining at a safe level.
Development of the new Strategy, resting on these three pillars, was
made possible thanks to consistent implementation of optimisation
processes within the Group in recent years.
Their effectiveness has been proved by the Group’s financial performance. Despite the slowdown in GDP growth rates and a decline
in fuel consumption across all our markets, in 2012 ORLEN Group
companies recorded total sales volumes of 35 million tonnes. This
allowed the Group to post its highest ever revenue of PLN 120bn
and generate LIFO-based operating profit of almost PLN 2.2bn.
There is no doubt that one of the most important elements of the new
strategy is an increase in capital expenditure on hydrocarbon exploration and production and power generation projects. This is a continuation of the path chosen by PKN ORLEN several years ago,
with a view to transforming into a multi-utility company. Activities
undertaken by PKN ORLEN in this direction are aimed at diversifying
revenue sources to ensure stable Company growth. This is particularly important in the face of continued macroeconomic challenges.
Last year was, for PKN ORLEN, a time of intensive gas exploration
efforts. For over a year, five wells were drilled in search of unconventional gas, including two horizontal wells. At present, upon completion of the sixth vertical appraisal well, preparations for the first
hydraulic fracturing operation are under way. Additionally, two new
exploration licences covering the Warsaw region were acquired. Also
in 2012, we continued exploration for conventional gas. Currently,
another appraisal well is being drilled in the Polish Lowlands and
preparations for drilling in the Baltic Sea are in progress. In the years
covered by the strategy, PKN ORLEN intends to drill a total of at least
50 wells in search of crude oil and natural gas.
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Another focus of the Company’s efforts in 2012 was on power generation projects. The key project in this sector is the construction of the CCGT
plant in Włocławek, which is to ensure electricity and heat for the ANWIL Group, PKN ORLEN and external customers. In December 2012,
a contract was executed with a general contractor, and on April 18th 2013, the cornerstone was laid. The unit is scheduled to come on-stream
in Q4 2015. Economic analyses are being prepared for a similar project – the construction of a power unit in Płock. In 2012, the project
underwent a concept analysis stage and a feasibility study, and a relevant environmental decision was secured.
2012 was also a year of enhancing management efficiency at the ORLEN Group. After purchasing minority interests in ANWIL, Rafineria
Jedlicze, IKS ‘Solino’ and Petrolot, PKN ORLEN became the companies’ sole shareholder. As a result of the purchase of shares in Petrolot,
the Company is now the leading player on the Polish aviation fuel market. We are currently devising a development strategy for Petrolot, with
possible expansion into other European markets in mind.
In the face of the still unstable macroeconomic environment, the main focus of our foreign companies was on improving operating efficiency.
We decided that our Czech subsidiary would permanently halt crude oil processing at the Paramo refinery, while ORLEN Lietuva would continue
its restructuring process. In this way, despite the regular maintenance shutdown, ORLEN’s Lithuanian refinery obtained satisfactory results in 2012.
In addition, the gradual recovery of retail margins on the German market was a positive factor in the performance of ORLEN Deutschland.
Another important development for the Company in the past year involved the adoption of PKN ORLEN’s new corporate values in response
to the dynamically changing market conditions. The importance of the PKN ORLEN Code of Conduct to the foundation of our modern corporate culture is shown in the fact that it was prepared alongside the updating of PKN ORLEN’s Development Strategy, which draws substantially
on the Code.
As the largest Polish company, last year PKN ORLEN initiated its traditional public debate about key social and economic issues. The Company also
supported a number of the most important initiatives in art, culture and sports, engaging in significant Corporate Social Responsibility projects.
Even in 2012’s difficult macroeconomic climate, PKN ORLEN managed to strengthen its market position and, most of all, set a course for
its further development. I am convinced that the first positive effects of the updated strategy will be visible as early as in 2013.
Maciej Mataczyński
Chairman of the Supervisory Board of PKN ORLEN
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PKN ORLEN MANAGEMENT BOARD
DARIUSZ JACEK KRAWIEC – President of the Management Board, CEO
Dariusz Jacek Krawiec was appointed President of the Management Board and Chief Executive Officer
on September 18th 2008. On March 24th 2011, for the first time in PKN ORLEN’s history, the Supervisory
Board appointed him for the next term as President of the Management Board. From June to September
2008 he had served as Vice-President of the PKN ORLEN Management Board.
He is a graduate of the Poznań University of Economics. From 1992-1997, he worked for Bank PEKAO SA and
the Ernst & Young and Price Waterhouse consulting firms. In 1998 he was with the UK branch of Japanese
investment bank Nomura plc, headquartered in London, where he was responsible for the Polish market.
From 1998 to 2002, he served as President of the Management Board and CEO of Impexmetal SA. In 2002,
he became President of the Management Board of Elektrim SA. From 2003 to 2004, he was the Managing
Director of Sindicatum Ltd London and from 2006 to 2008, he served as President of the Management
Board of Action SA. He has a wealth of experience working on corporate supervisory bodies. He has chaired
the Supervisory Boards of Huta Aluminium Konin SA, Metalexfrance SA of Paris, S and I SA of Lausanne,
and ce-market.com SA. He has been a Member of the Supervisory Boards of Impexmetal SA, Elektrim SA,
PTC Sp. z o.o., Elektrim Telekomunikacja Sp. z o.o., Elektrim Magadex SA, Elektrim Volt SA and PTE AIG.
Currently, he serves as Chairman of the Supervisory Board of Unipetrol, a.s. and Member of the Supervisory
Board of Polkomtel SA.
SŁAWOMIR JĘDRZEJCZYK – Vice-President of the Management Board,
Chief Financial Officer
Sławomir Jędrzejczyk was appointed Member of PKN ORLEN Management Board in June 2008. Until
September 2008 he served as a Member of PKN ORLEN Management Board, and on September 18th
he became its Vice-President. On March 24th 2011 the PKN ORLEN Supervisory Board adopted a resolution
on his appointment as Vice-President of PKN ORLEN Management Board for the next joint three-year term,
beginning June 30th 2011.
Sławomir Jędrzejczyk is in charge of finances, controlling, accounting, supply chain management, investor
relations, M&A, and IT. His biggest responsibilities include implementing strategies geared towards increasing
value, cultivating capital market relations, providing financing, and increasing cash flows through operating
excellence, divestments, and projects involving working capital. From 2008 to May 2013 he served as Member
of the Management Board of AB ORLEN Lietuva. Currently, he serves as Vice-Chairman of the Supervisory
Board of Unipetrol, a.s.
Mr Jędrzejczyk graduated from the Łódź University of Technology and obtained the title of British Certified
Auditor from the Association of Chartered Certified Accountants. From 2005 to 2008 he served as President
of the Management Board and CEO of Emitel. Earlier he had worked for companies listed on the Warsaw
Stock Exchange: as Head of the Controlling Division of Telekomunikacja Polska SA, as Member of the Mana
gement Board and Chief Financial Officer at Impexmetal SA, and in the Audit and Business Consulting
Division of Price Waterhouse.
Composition of the PKN ORLEN Management Board as at May 31st 2013.
8
PIOTR CHEŁMIŃSKI – Member of the Management Board, Petrochemical Operations
Piotr Chełmiński was appointed Member of the Management Board of PKN ORLEN on March 10th 2012.
The Supervisory Board permitted him to serve simultaneously as Member of the Management Board
at Unipetrol, a.s., which is a PKN ORLEN subsidiary.
He is a graduate of the Warsaw University of Life Sciences. He has experience in working on Polish and
foreign Management Boards, including companies listed on the stock exchange. From 1995 to 1996 he worked as Vice-President for Sales, Marketing and Export in Okocimskie Zakłady Piwowarskie SA. In 1996-1999
he held the position of Regional Director for Central and Eastern Europe in EckesGranini GmbH & Co. KG and
was President of its subsidiary, Aronia SA. From 1999 to 2001 he was Member of the Management Board
of Browar Dojlidy Sp. z o.o., and from 2001 to 2002 he held the position of Member of the Management
Board and Member of the Supervisory Board of Werner & Merz Polska Sp. z o.o. In 2001-2006 he was Member
of the Management Board and Member of the Supervisory Board of Kamis-Przyprawy SA, being responsible
for direct operational supervision of Sales and Marketing. From 2006 to 2009 he held the position of Vice-President for Sales and Marketing at Gamet SA in Toruń, and Member of the Management Board of Gamet
Holdings SA in Luxembourg. In December 2009 he took the position of President of the Management Board
and CEO at Unipetrol, a.s., which he held until April 2013. Currently, he serves as Chairman of the Supervisory
Board of ANWIL SA, Chairman of the Supervisory Board of Basell Orlen Polyolefins Sp. z o.o. and Member
of the Supervisory Board of Unipetrol, a.s.
KRYSTIAN PATER – Member of the Management Board, Refinery Operations
Appointed to the position of Member of the Management Board of PKN ORLEN in March 2007. On March
24th 2011, the PKN ORLEN Supervisory Board adopted a resolution regarding his appointment to Vice-President
of the PKN ORLEN Management Board for the next joint three-year term, beginning with June 30th 2011.
He is a graduate of the Nicolaus Copernicus University in Toruń, Faculty of Chemistry. He completed
postgraduate courses in Chemical Engineering and Equipment at the Warsaw University of Technology
(1989), Management and Marketing at the Paweł Włodkowic University College (1997), Petroleum Sector
Management (1998), Company Value Management (2001-2002) at the Warsaw School of Economics, and
the Management 2012 programme at the ICAN Institute. From 1993, he worked at Petrochemia Płock SA,
and then PKN ORLEN, where from 2005 to 2007 he was Executive Director for Refinery Production. Currently
he is a Member of the Management Board of AB ORLEN Lietuva and a Member of the Supervisory Board
of Unipetrol, a.s. Additionally, he is a Member of the Management Board of CONCAWE, and the Chairman
of the Association of Oil Industry Workers in Płock.
MAREK PODSTAWA – Member of the Management Board, Sales
Marek Podstawa was appointed Member of the Management Board for Sales by the Supervisory Board
on March 19th 2012. Since January 2009 he has held the position of Executive Director, Retail Sales.
He is a graduate of the AGH University of Science and Technology in Kraków, faculty of Electrical Engineering, Automatics and Electronics. He also holds an MBA from the University of Minnesota and the Warsaw
School of Economics. He has a wealth of experience in leading and managing international teams, developing
strategies, as well as project, operating, and crisis management.
From 1990 to 1992 he worked at the Central Plants of Metallurgy Automation, and then he worked
at DuPont Conoco Poland until 1996. After the company transformed into the ConocoPhillips fuel company,
until 2008 he held positions in retail and wholesale trade, marketing and business development, and sat
on the company’s management board in Poland. He then worked in various Central European countries,
Germany, and the United States, where at the ConocoPhillips headquarters in Houston, Texas, he served
as Director for Wholesale Programmes, and then as Director for Strategic Planning. From 2009 to 2010
he was a Member of the Management Board of Benzina, s.r.o. Currently, he is Chairman of the Supervisory
Board of ORLEN Deutschland GmbH.
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LETTER FROM THE PRESIDENT
OF THE MANAGEMENT BOARD OF PKN ORLEN
P KN ORL E N ANNUAL RE P ORT 2012
LADIES AND GENTLEMEN,
DEAR SHAREHOLDERS,
For the ORLEN Group, 2012 was an eventful period, crowned with
the November adoption of the ORLEN Group Development Strategy
for 2013-2017.
The decision to adopt the new strategy was made in the context
of the clear benefits delivered by our stabilisation measures. The strategy provides for the further sustainable development of the ORLEN
Group, fully leveraging all of its potential. The Group’s value will
continue to be built up thanks to such achievements as the over
40% increase in average annual operating cash flow compared with
2008-2012, and a capital expenditure plan for the next five years
that provides for the spending of up to PLN 22.5bn. Our priority
objective remains unchanged – to ensure financial security and keep
financial leverage below 30%. We are convinced that by achieving our
strategic objectives we will be able to launch a progressive dividend
policy, with distributions to shareholders growing steadily until they
reach 5% of the Company’s market capitalisation, calculated based
on the average share price in the year preceding dividend payment.
Our plans rely on the Group’s sound liquidity, which comes primarily
from the delivery of the 2008-2012 strategy’s business and investment objectives and the steps we have taken to optimise working
capital, as well as by our deleveraging efforts. Downsizing of our
net debt to below PLN 6.8bn has allowed us to reduce our financial
leverage to a safe 26%. Our efforts have been viewed favourably
by both Moody’s and Fitch, who have upgraded our long-term
rating outlook to Positive.
Even in the prevailing business environment, there is no doubt that
last year the ORLEN Group further solidified its market position.
Despite the slowdown in GDP growth rates and decline in fuel consumption across all our markets, compounded by the grey economy
both in Poland and the Czech Republic, we recorded robust sales
in the region of 35 million tonnes, on a par with the previous year’s
result. We also posted the highest ever revenue of PLN 120bn, and
an all-time high operating profit before depreciation/amortisation
and valuation of inventories and impairment losses on non-current
assets (LIFO-based EBITDA) of more than PLN 5.2bn.
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LETTER FROM THE PRESIDENT
OF THE MANAGEMENT BOARD OF PKN ORLEN
The favourable macroeconomic climate, including the effect of model refining margins and exchange rates, substantially improved
the operating results of the refining segment. Before the effect of valuation of inventories and impairment losses on non-current assets,
the segment’s operating profit amounted to PLN 1.8bn. The rise of the retail segment’s operating profit to almost PLN 0.7bn before
impairment losses on non-current assets is largely attributable to our pricing strategy, which is geared to stimulate demand for fuels,
gradually improve margins on the Polish and German markets, and further expand our non-fuel offering.
The 2012 performance of the petrochemical segment reaffirmed the ORLEN Group’s position as the region’s major petrochemical
company, leading the market for olefin and polyolefin producers. It was the first full year of operation of the PTA plant in Włocławek,
thanks to which the sales of terephthalic acid grew by more than 40%, to almost 0.5 million tonnes. An increase was also recorded
in sales volumes of artificial fertilisers and polymers. The segment’s operating profit before the effect of valuation of inventories (LIFObased EBIT) and impairment losses on non-current assets was almost PLN 1.3bn.
With the need to diversify our revenue streams in mind, we are striving to build a multi-utility company. This is why we are continuing to invest in the development of new areas of our operations – upstream activities and the power segment. By the end of 2012,
we were focused on drilling and testing five wells on unconventional hydrocarbon plays, including two horizontal wells. We also took
steps to acquire new licences previously held by Exxon Mobil, successfully completing the process in early 2013, and began the drilling
of our eighth exploration well. We also completed our first hydraulic fracturing treatment, on a horizontal section, and are preparing
to do so again at another site. We also fulfilled all of our conventional hydrocarbon exploration plans for 2012, having completed
preparations to drill an appraisal well in the Polish Lowlands (Sieraków). The scale of our commitment to the upstream business is best
demonstrated by the capex earmarked for that purpose in our new strategy: up to PLN 5.1bn to be spent over the next five years,
during which time we plan to drill – through our ORLEN Upstream subsidiary – at least 50 exploration wells.
In 2012, we also stepped up work on our power generation projects, signing a contract with a general contractor for the CCGT
plant in Włocławek and handing over the project site at the beginning of March 2013. The plant will generate electricity and heat for
the needs of the ANWIL Group and PKN ORLEN, with about half of its electric output being sold to external customers. The second
power generation project, for construction of a similar plant in Płock, underwent a concept analysis stage and a feasibility study. We also
secured the necessary environmental decision, and are now analysing the project’s economics.
We have repeatedly stressed the importance of secure supplies of crude oil to the ORLEN Group. With that in mind, our successful
agreement on the terms of business and execution of a three-year extension annex to our contract with Mercuria Energy Trading, for
the supply of crude oil to the Płock refinery via the Druzhba Pipeline, must be viewed as another crucial event. The PLN 26bn contract
provides for the supply of 3.6 million tonnes of REBCO crude annually. Also worthy of mention is a contract with Russia’s largest crude
oil producer, the Rosneft Oil Company, which was finalised in early January 2013. Interestingly, this is the first crude sales contract
signed by Rosneft directly with a European refiner. Worth PLN 46bn, the contract will see the ORLEN Group supplied with approximately
6 million tonnes of crude annually for the next three years.
Throughout 2012, we continued to enhance the efficiency of the ORLEN Group’s management, partly by purchasing minority interests
in some of its Polish companies. As a result, PKN ORLEN became the sole shareholder of ANWIL, Rafineria Jedlicze, IKS ‘Solino’ and
Petrolot. With the purchase of the Petrolot shares from PLL LOT, we have also become the leading wholesaler of aviation fuel.
12
We are currently devising a development strategy for those assets, with a particular focus on other European markets. In an attempt
to optimise the wholesale of fuels, which was previously handled directly by PKN ORLEN and ORLEN PetroCentrum, 2012 saw intensive
effort spent on centralising the wholesale business. As part of the changes, ORLEN PetroCentrum was transformed into ORLEN Paliwa.
The focus of our efforts in foreign markets was on improving the operating efficiency of our companies based in the Czech Republic
and Lithuania. For instance, at our Czech subsidiary Unipetrol, crude oil processing was permanently halted at the Paramo refinery,
while at ORLEN Lietuva we continued to implement a number of restructuring measures. We also successfully completed a maintenance
shutdown of the entire refinery, a task which is undertaken at regular four year intervals. It should be noted that, despite the 84%
capacity utilisation rate caused by the shutdown, our Lithuanian subsidiary reported a healthy operating profit before depreciation and
amortisation (EBITDA) of approximately USD 180 million.
Last year, we also sought to actively contribute to the on-going debates about the most important social and economic issues. Key
discussions featuring representatives of the ORLEN Group included those held at the European Forum of New Ideas, the European
Financial Congress and the Economic Forum in Krynica. We also attended the St. Petersburg Economic Forum, where discussions centred
on the role of leadership in shaping the global economy.
The steadily improving position of the ORLEN Group was confirmed by the string of awards and distinctions conferred by expert panels
in 2012. PKN ORLEN also continues to be included in the Warsaw Stock Exchange’s elite RESPECT Index, an honour it has enjoyed since
2009. In recognition of our exemplary reporting standards, we won ‘The Best Annual Report 2011’ award in the Enterprise category.
We also received a special award for using innovative, Internet-based communication tools in our investor relations in the ‘Golden Website’
competition for listed companies. We were honoured with a ‘TOP Employers Polska’ certificate, as a token of recognition of the excellent working conditions enjoyed by our staff. Our position is also evidenced by a first place in the EMEA Refining & Marketing category
of the prestigious Platts 250 Global Energy Company Rankings.
In the face of a still precarious operating environment, we can rest assured that our position has been built on solid foundations.
The efforts we have undertaken over the past four years, as well as the clear strategic vision of our development strategy, allow
us to look forward with optimism and anticipate the ORLEN Group’s continued development. Our achievements so far would have
been impossible, however, without the efforts of all our employees, who – in making hundreds of everyday decisions and shouldering
additional responsibility in a time of crisis – are the driving force behind the success of the ORLEN Group. I would like to thank all our
employees and the members of the Supervisory Board for our continued fruitful cooperation, which is the key to creating ORLEN value.
Dariusz Jacek Krawiec
CEO, President of the PKN ORLEN Management Board
13
Shale gas in Poland
The shale gas belt in Poland spreads
from the north (Słupsk and Gdańsk)
to the south-east, through Warsaw
and further towards Lublin and Zamość.
In 2012, the Polish Geological Institute
issued a report containing estimates
as to the size of unconventional gas
reserves in Poland, which most likely
vary between 346 and 768 billion
cubic metres.
ORLEN Upstream
ORLEN Upstream was established
to implement PKN ORLEN’s hydrocarbon
exploration and production strategy, and holds
ten licences for oil and gas exploration
throughout Poland, (including licences
for shale gas and tight gas exploration):
eight in the Provinces of Lublin and Warsaw,
and two in central Poland, in the vicinity
of Łódź and Sieradz. The Company holds
10% of the area of all licence areas where
exploration for hydrocarbons takes place.
WHO
WE ARE
ORLEN Upstream licences
Licences
for exploration and
appraisal
of hydrocarbons
WHO WE ARE
PKN ORLEN ranks among the largest
and most modern refining and petrochemical
companies in Central Europe. In parallel
to strengthening the areas which have always
been our forte, we are always searching
for new sources of value growth, complementary
to our primary business. In keeping with
our credo ‘ORLEN. Fuelling the future’,
we want to play an active role in setting
the pace and direction of change in the region.
We hold licences for onshore and offshore oil and gas exploration
throughout the country. One of our priorities is to appraise and
exploit natural gas from unconventional plays. Our strategy envisages
PKN ORLEN as further evolving towards a multi-utility, actively searching for added value in areas complementary to its core operations.
Such fast growth would not be possible without people – our most
important asset. Every day, the work and involvement of our 22,000
employees continues to build the success of the ORLEN Group.
OUR CORE VALUES
For 14 years, since the establishment of PKN ORLEN, we have managed to combine the legacy of our predecessors and an ambitious
ORLEN. FUELLING THE FUTURE
vision of development, with innovativeness and modern management.
The universal and understandable values upon which our corporate
Our products and services have been highly esteemed by both retail
culture is built support the pursuit of Company objectives and prevent
and institutional customers for years. The ORLEN Brand, though
irregularities in business operations. Today, it is clearly visible that
relatively young, has for five years occupied the top position among
the most successful companies are those whose activities reflect
the most valuable brands in the prestigious Rzeczpospolita daily
their values. A coherent set of values makes it easier to prepare
newspaper’s rankings.
for necessary changes – in our case, the strategy to transform
PKN ORLEN into a modern, multi-utility company, and to enter
The Company boasts the largest regional network of 2,700 modern
the unconventional gas production market.
service stations, located in Poland, Germany, the Czech Republic
and Lithuania, which provide the highest quality fuels and a broad
This belief is manifest in the resolution adopted by the PKN ORLEN
range of products and additional services, including the Stop Cafe,
Management Board on September 4th 2012, which introduced
Stop Cafe Bistro and Star Cafe catering facilities. PKN ORLEN’s retail
the PKN ORLEN Code of Conduct. The document introduces a new
network is effectively supported by its logistics infrastructure, includ-
mission and a new credo, and includes a set of values that reflect
ing surface and underground storage depots and a long-distance
the image of a company created by people with passion and energy,
pipeline network.
who are responsible and reliable.
PKN ORLEN manages seven refineries in Poland, the Czech Republic
The new values – Responsibility, Progres, People, Energy, and
and Lithuania. The integrated refining and petrochemical production
Dependability – pave the way to reaching ambitious goals.
complex in Płock is one of the most advanced and efficient facilities
of its kind in Europe. In 2012, the aggregate amount of crude oil
As a supplement to the Company’s strategy, the PKN ORLEN Code
processed by the ORLEN Group was 28 million tonnes.
of Conduct indicates the manner in which employees should determine
their business goals. The PKN ORLEN Code of Conduct is a guide
16
The Company’s business consists in the processing of crude oil into
to relations inside and outside the company – with business partners,
unleaded petrol, diesel oil, fuel oil and aviation fuel, as well as plas-
local communities, the natural environment, and our competition.
tics and other petrochemical products which can be found in many
It places an emphasis on building mutual trust within the organisation,
everyday articles, including bitumen, kitchen salt, toys, fertilisers,
and provides a way for employees to log their doubts, questions,
cosmetics, medication, and construction materials.
and any irregularities they notice. It also indicates that an immediate
superior should be the first person to be contacted in such matters,
and, if such contact is not possible due to the character of a given
OUR CORE VALUES
matter, the employee’s concerns may be voiced, anonymously and
in a confidential manner, with the Ethics Committee or the Ethics
Officer.
Definition of the new company mission, credo and values, introduction of the PKN ORLEN Code of Conduct and a malpractice reporting
RESPONSIBILITY
system have streamlined the corporate culture at PKN ORLEN. The new
We respect our customers,
approach to company ethics places PKN ORLEN at the forefront
shareholders, the natural environment
of companies prepared for the challenges of the future. The Com-
and local communities.
pany is aware that today, organisational culture based on collaboration, trust, and the strengthening of social capital is the pillar
of competitive advantage. The positive energy that stems from such
PROGRESS
organisational culture is then reflected in market performance and
We explore new possibilities.
success in reaching business goals.
PEOPLE
We are characterised by our know-how,
teamwork and integrity. ENERGY
We are enthusiastic about what we do. DEPENDABILITY
You can rely on us.
17
WHO WE ARE
THE ORLEN GROUP
ON THE CAPITAL MARKET
On the capital market, we are also represented by one of our
subsidiaries, Unipetrol, a.s., which is listed on the main market
of the Prague Stock Exchange and the OTC market (RM-SYSTÉM,
PKN ORLEN’s share capital is PLN 534,636,326.25 and is divided into
a.s.). The company’s share capital is divided into 181,334,764 ordinary
427,709,061 ordinary bearer shares with a par value of PLN 1.25
shares with a par value of CZK 100 per share, of which 67,111,996
per share.
(37.01%) are in free float.
The Company’s shares have been listed in the continuous trad-
In addition, Unipetrol bonds are listed on the corporate sector market
ing system on the main market of the Warsaw Stock Exchange
of the Prague Stock Exchange. The company issued 2,000 outstand-
since November 1999. PKN ORLEN shares are part of the blue-chip
ing bonds with an aggregate nominal value of CZK 2,000,000,000,
WIG20 index, the WIG index and the WIG-Paliwa index of fuel
maturing on December 28th 2013.
th
sector companies. Since November 19 2009, its shares have also
been included in the Respect social responsibility index. We have
PKN ORLEN SHAREHOLDER STRUCTURE
been a part of this elite group ever since, and in 2012 we were
positively vetted for the sixth consecutive time during the index’s
periodic update.
In 2012, the price of PKN ORLEN shares was up 46%, substantially
Shareholder structure of PKN ORLEN as at December 31st 2012
2012
outperforming the blue-chip average, as WIG20 grew by 20.4%.
By the end of 2012, the share price had reached PLN 49.50, with
a market capitalisation of PLN 21.172bn.
5.02%
ING OFE*
62.38%
Others
In the same period, 286 million PKN ORLEN shares were traded
in the continuous trading system, representing 66.9% of all outstanding shares. The share price peaked on December 19th 2012,
5.08%
Aviva OFE*
at PLN 52.95.
27.52%
State Treasury
In 1999, PKN ORLEN listed its shares as Global Depositary Receipts
(GDRs) on the London Stock Exchange. Then, in 2001, the Company introduced its American Depositary Receipts (ADRs) to trading
on the US OTC market. After diminishing interest from investors
in depositary receipts, in 2012 the Company decided to end both
programmes.
On June 27th 2012, PKN Orlen bonds issued in February 2012 were
floated on the Catalyst market. The aggregate value of bonds introduced to the alternative trading system was PLN 1bn. At present,
there are 10,000 outstanding seven-year PKN Orlen bonds, maturing
on February 27th 2019.
18
* based on data provided by the investment fund
THE ORLEN BRAND
AWARDS AND DISTINCTIONS
We are proud to be the creators of one of the most valuable Polish
Our numerous awards are proof that PKN ORLEN is on the right
brands. ORLEN once again secured a top position in the ‘Most Valu-
development path. At the same time, they oblige us to constantly
able Polish Brand’ MARQA ranking compiled by the Rzeczpospolita
improve our services, customer service quality and management model.
daily newspaper, in which the value of our flagship brand was
estimated at more than PLN 3.8bn.
» Most Valuable Polish Brand
In 2012, the ORLEN brand once again secured a top position
The ORLEN brand lies at the heart of our communications and
in the prestigious ‘Most Valuable Polish Brand’ MARQUA ranking,
marketing activities. Even though it is relatively young, having been
compiled periodically by the Rzeczpospolita daily newspaper,
introduced to the market as recently as 2000, it has quickly become
which estimated its value at more than PLN 3.8 million.
synonymous with exemplary expansion. Today, millions of individual
and business customers associate ORLEN with modernity, profes-
» Most Trusted Brand
sionalism, innovative products and world class solutions.
Thanks to the trust placed in us by our customers, for the eleventh consecutive time we were named the ‘Most Trusted Brand’
ORLEN helps people get on with their everyday lives and takes
in the Service Station category of the largest European consumer
responsible action to shape the future, in keeping with our credo:
survey, conducted by Reader’s Digest. The ORLEN brand received
‘ORLEN. We fuel the future’.
the most spontaneous votes with high scores for Quality, Value,
Image and Understanding of Customer Needs.
The Company’s market image is projected through its service station network. The ORLEN brand is also displayed on products such
» Consumer’s Golden Laurel
as engine oils, operating fluids, lubricants and a variety of chemicals
For the fourth consecutive time, the FLOTA Programme re-
for motor vehicles.
ceived the ‘Consumer’s Golden Laurel’ in the Service Stations
– Business Customer category. Our award-winning FLOTA fuel
Our customers appreciate the accessibility of our service stations and
cards enable cashless payment for fuel, merchandise and services
their convenient locations, and value the high quality of the products
bought at ORLEN and BLISKA service stations throughout Poland.
on offer. We regularly monitor service quality in order to improve
BIZNESTANK and TANKBANK cards complement the range of cards
its standard, and customers can benefit from VITAY and Club
on offer.
SUPERVITAY loyalty programmes. Business customers can also enrol
in the FLOTA Programme for vehicle fleets.
» European Ecological Award
We understand that there are many dimensions to customer
To meet the rising expectations of our individual and business
service, including care for the environment. In recognition of our
customers, we have been gradually expanding and improving our
efforts, in 2012 we received a ‘European Ecological Award’
non-fuel services. Premium service stations comprise not only well-
from the National Environmental Council in the 13th edition
stocked stores, but also offer food services under the Stop Cafe
of the ‘Environment-Friendly’ competition, organised under
and Stop Cafe Bistro brands, which serve excellent coffee and
the auspices of the President of Poland.
delicious and convenient meals, such as the hugely popular hotdogs (ORLEN is the largest domestic provider of hot-dogs). Having
» Top 250 Global Energy Company
in mind the needs of our most demanding customers, who wish
In 2012, we were placed 83rd on the Top 250 Global Energy
to use their time as efficiently as possible, we created the first Polish
Company list, and won first place in the Refining & Marketing
network of service stations with business meeting facilities – Meeting
category in the Europe, Africa and Middle East region.
Point Stop Cafes.
19
WHO WE ARE
» Leader in Responsible Business
We were one of the first companies in Poland to establish inter-
In 2012, we were awarded the ‘Leader in Responsible Business’
sectoral partnerships. The effects of the activities undertaken by
title for the second time, by the Employers of Poland organisa-
the organisations we support (the Grant Fund for Płock Foundation
tion. We also maintained our high position in the 2012 Respon-
and the Good Neighbourhood Grant Fund for Ostrów Wielkopolski
sible Companies Ranking compiled by the Responsible Business
Association), prove that the assumptions we have adopted are right
Forum and PwC. In addition, we won a ‘CSR Silver Leaf’ from
and confirm the value of dialogue with local partners.
Polityka magazine. For years, the Responsible Business Forum
has recognised the value of PKN ORLEN’s CSR efforts, present-
One of our priorities is comprehensive education implemented through
ing them in the ‘Responsible Business in Poland: Best Practices’
such Company projects as Poczuj Chemię (‘Feel the Chemistry’ –
report.
a multimedia campaign promoting knowledge of chemistry), and
‘ORLEN. Safe Roads’. We are also committed to creating favourable
Our consistent CSR initiatives are complimented by an open com-
conditions for developing social capital, top-quality social relations
munications policy. We are one of the few companies in Poland
and a high level of trust, thus improving the competitiveness and
that publish corporate social responsibility reports compliant with
innovativeness of the Polish economy.
the international GRI reporting standard. This year, another prize
was added to ORLEN’s impressive collection of distinctions won
In 2001, we established the ORLEN Gift from the Heart Foundation,
in the CSR Report competition – a ‘2012 Journalists Award’.
which lies at the core of our social mission, as set forth in the Charity Policy of PKN ORLEN. The Foundation mainly involves support
CORPORATE SOCIAL
RESPONSIBILITY (CSR)
We take a broader look at the world around us, engaging in activi-
programmes for children in group homes, scholarship programmes,
Company projects concerning health and safety and support for
local communities.
ORLEN. SAFE ROADS
ties aimed at changing the present and creating a better future for
people and the environment. We believe that social capital is one
Since 2006, we have been pursuing our own road traffic safety
of the pillars of sustainable development. Therefore, many of our
programme – ‘ORLEN. Safe Roads’.
CSR initiatives focus on strengthening high-quality social relations
and enhancing the level of trust, thus creating a competitive and
As part of the ‘Protect life, wear a reflector!’ initiative, we distributed
innovative economy.
200,000 reflective stickers and bands to help improve pedestrian
safety on the roads. The campaign, run in conjunction with the Road
Every business activity should be in compliance with a set of values,
Traffic Office of the Polish National Police Headquarters, the Provincial
taking into account the interests of stakeholders – employees, cus-
Police Headquarters, county and municipal police headquarters and
tomers, partners and local communities, rather than just pure profit.
almost a thousand Roman Catholic parishes, covered the communes
In our day-to-day management, we strive to adhere to the principles
and municipalities of the Warsaw province. The primary idea behind
of sustainable development, defined by the UNDP as ‘satisfying
the initiative was to enhance the safety of pedestrians walking along
the development aspirations of the current generation in a manner
roadsides, outside the city.
ensuring that the same objectives may be pursued by future generations.’ We pay great attention to building proper relations with our
It was not only the scale of the activities, but also its target group
environment, both on the local and global scale. We work with local
that made the campaign stand out from other, similar initiatives.
communities, local authorities and non-governmental organisations.
The campaign targeted adult residents (40+) of rural areas which
are usually hard to reach during educational campaigns.
20
SPONSORSHIP
of which multimedia classes devoted to the source, production,
processing and application of crude oil were held in 500 junior high
SOCIAL SPONSORSHIP
schools throughout Poland.
As part of our social sponsorship activities, we focus on promoting
Together with the ORLEN Gift from the Heart Foundation, we launched
art and culture, supporting educational projects and fostering dif-
the Mistrzowie chemii (‘Masters of Chemistry’) programme, thanks
ferent fields of science.
to which ten scholarship holders were given the opportunity to continue their education at reputable schools producing future students
As a patron of the arts, we are involved in activities under several
of science. These initiatives were run in conjunction with the Junior
programmes focusing on selected thematic areas.
High School and Academic High School of the Nicolaus Copernicus
University of Toruń and the Chemistry and Environmental Protection
The first involves support for key events relating to the promotion
Technical School No. 3 at the Maria Skłodowska-Curie Chemical
of cinematography (co-sponsoring of the Gdynia Film Festival and
Sciences School Complex in Kraków.
participation in the digitisation of major Polish films).
Together with the Warsaw University of Technology, we also took
We also support important theatrical events through our continuing
a number of measures to encourage high school students to continue
cooperation with the IMKA Theatre, as well as through our spon-
their education in science.
sorship of a show by Ailey II, a US contemporary dance company,
and participation in the organisation of the Theatre Confrontations
SPORTS SPONSORSHIP
Festival in Lublin.
Sports sponsorship has for years been one of the most effective
The promotion of classical music is another area of our activities.
tools for creating the image of our brands and consolidating our
Once again, we supported the Ludwig van Beethoven Easter Festival
position both on the domestic and global market. Thanks to our
and our continued cooperation with the Grand Theatre in Warsaw
support, leading Polish sportsmen may develop their talents and
on the staging of the opera version of War and Peace by Sergei
successfully represent Poland in major international tournaments.
Prokofiev, performed by the Mariinsky Theatre of Saint Petersburg.
Bearing in mind the local community’s expectations, we have also
Athletics, volleyball and motor sports are disciplines which not only
provided support for the activities of the Płock Symphony Orchestra.
enjoy popularity among their fans, but also perfectly reflect the nature
of our operations. This is why we focus our sports sponsorship
Our cooperation with the Mazovian Museum in Płock and our
activities on these disciplines.
involvement in the reconstruction of the roof of the synagogue
in Gwoździec, which will become a part of the permanent exhibition
Social aspect of our sports activities
of the new Museum of the History of Polish Jews, were manifesta-
As part of the ‘Life to the Full’ scholarship programme, initiated by
tions of our care to preserve historical heritage.
PKN ORLEN and the ORLEN Gift from the Heart Foundation in 2012,
scholarships were granted to Poland’s six best disabled athletes who
In our commitment to our local communities, we have implemented
won gold medals in the 2012 Summer Paralympic Games in London,
a number of initiatives targeted at the residents of the town and region
proving that breaking barriers is possible.
of Płock. Key projects have included the construction of a modern
skatepark and another playground. As part of the Scholarship Funds
The ORLEN Gift from the Heart Foundation’s sports scholarship
operations, almost 200 pupils received scholarships as a reward for
grantees included: Karolina Kucharczyk (long jump), Barbara
their performance at school and social involvement.
Niewiedział (1,500-meter run), Ewa Durska (shot put), Mateusz
Michalski (200-meter run), Maciej Lepiato (high jump) and Katarzyna
Our educational activities are focused around Company projects, such
Piekart (javelin throw).
as Lekcja Chemii ORLEN (‘The ORLEN Chemistry Lesson’), as part
21
WHO WE ARE
ORLEN Sports Group
COMPANY PROJECTS
In 2012, we sponsored the Polish representation at the London
Olympic Games.
THE ORLEN TEAM
For several years, we have also supported some of the country’s best
Last year, our flagship project in the area of motor sports once
athletes, who together make up the ORLEN Sports Group (OSG).
again delivered the results we had counted on, as well as solid
Currently, the Group is composed of: Tomasz Majewski (shot put-
marketing returns. The ORLEN Team started off the season with
ter), Piotr Małachowski (discus thrower), Anita Włodarczyk (hammer
the famed Dakar rally. In his twelfth Dakar start, Jacek Czachor
thrower), Adam Kszczot and Marcin Lewandowski (middle-distance
ranked 13th in this, the world’s most demanding rally challenge.
runners) and Henryk Szost (marathon runner).
Jacek can boast of never having failed to reach the finish line – a feat
no other driver in the Dakar’s history can claim. This year’s rally saw
In 2012, the OSG members provided much fun and excitement
Marek Dąbrowski cross the line in 29th place, completing the race
for sports fans. At the 2012 Olympic Games in London, Tomasz
for the eighth time in his eleven-start history. Unfortunately, Kuba
Majewski defended his title, won at the Beijing Olympics. In this way,
Przygoński was unable to finish the rally due to an engine failure,
he proved to be the best shot putter in the world. Anita Włodarczyk
which ruled him out of the competition in the third stage. Also,
expanded her vast collection of trophies to include a silver Olympic
the Krzysztof Hołowczyc and Jean-Marc Fortin team struggled with
medal and a victory in the Kamila Skolimowska Memorial. The gold
a string of failures, although they eventually finished in a respect-
medal in the latter competition was awarded to Piotr Małachowski.
able 9th place.
Volleyball
The 2012 World Championship season was far more of a success,
In 2012, volleyball became another pillar of our sports marketing
with all ORLEN Team motorcyclists securing podium wins. Kuba
activities, along with athletics and motor sports. Under an agreement
Przygoński was third from top in the FIM cross-country rally Word
with the Polish Volleyball Federation, we became the main sponsor
Championship (his fifth World Championship title won in ORLEN
of the Polish representation in the men’s and women’s volleyball
Team colours). Jacek Czachor was the winner in the Open Trophy
championships and the title sponsor of the women’s professional
class, while Marek Dąbrowski came in second.
volleyball league, which took the name of ORLEN League.
Additionally, towards the year’s end the team was joined by Tadeusz
In the 2012 season, we participated in selected tournaments, includ-
Błażusiak, a two-time SuperEnduro World Champion, a four-time
ing the ORLEN Mazury Grand Slam (a beach volleyball tournament)
US AMA Endurocross Champion, as well as a European Champion
in Stare Jabłonki. We also supported Grzegorz Fijałek and Mariusz
and multiple Polish Champion in observed trials. He is the world’s only
Prudel, Poland’s best beach volleyball pair, competing in international
competitor with a track record of five victories in the Erzbergrodeo.
tournaments and the London Olympic Games.
As an ORLEN Team rider, Tadeusz Błażusiak will compete in Endurocross and SuperEnDuro, as well as the Xgames and Erzbergrodeo
The outstanding results of Polish volleyball players in 2012, and
events. In the long term, he will be taking part in cross-country
in particular their victory in the FIVB Volleyball World League,
rallies, including the Dakar.
attracted considerable interest for this discipline from sports fans
and the media.
Our increased involvement in the support of volleyball, one of the most
popular sports in Poland, follows from the Company’s long-term
strategy focused on the sponsorship of team sports and international sports events.
22
THE ‘POLES WITH VERVE’ AWARD
VERVA STREET RACING
One new platform for our CSR activity is the ‘Poles with Verve’ award
On September 15th 2012, Warsaw hosted the world’s motorsports
– an unprecedented initiative to showcase our country’s greatest
elite, who arrived at the third edition of the VERVA Street Racing
potential – its people – those who have ideas, drive and persever-
event. On a racing track built around Teatralny square, an audience
ance to create magnificent things, unknown to the general public.
of over 100,000 watched a motorsports show – the largest in Poland
and this part of Europe. VERVA Street Racing is a unique event,
The ‘Poles with Verve’ award is intended for young artists, scientists,
providing an occasion to present a wide range of disciplines, cars and
inventors and business people whose talent and passion is turning
motorcycles. In 2012, Warsaw hosted the famous Mika Häkkinen,
Poland into a modern and innovative country. ‘Poles with Verve’
a two-time Formula One World Champion. The Red Bull Racing F1
are chosen in seven different categories, which we consider crucial
team also made an appearance at the 2012 VERVA Street Racing
to the country’s fast-paced growth: science, medicine, culture and
event. The audience had a chance to admire the performance
art, environmental protection, business innovation, design and sports.
of the RB7 F1 car, with which the team won the 2011 Constructors’ championships. The driver behind the wheel that day was
th
The project was launched on September 14 2012 at an official
Jean-Eric Vergne.
gala held in Warsaw, with an audience of 1,500 in attendance,
including a number of leading figures from the world of politics,
The VERVA Racing Team and ORLEN Team drivers, as well as athletes
business, culture and art. A live TV broadcast of the event attracted
of the ORLEN Sports Group, were all among the event’s partici-
over 2.2 million viewers.
pants. This third edition of the only street racing event of its size,
beat all the records – the streets of Warsaw saw more than 210
VERVA RACING TEAM
performance cars and motorcycles, taking part in as many as 38
runs over nearly five hours.
2012 was the third season in which the VERVA Racing Team took
part in the prestigious Porsche Supercup motor racing series. Early
The event was covered by a top commercial TV station, attracting
in the year, the team was joined by a fresh name – Patryk Szczerbiński,
more than 2.5 million viewers.
who won a nationwide open talent search for a new VERVA Racing
Team driver to replace Stefan Rosina. In the 2012 season, Kuba
MOBILE STOP CAFE
Giermaziak ultimately placed seventh in the overall driver standings,
as he took third place on the podium of the Hungaroring circuit
The mobile Stop Cafe is Poland’s only bistro on 16 wheels, which
in Hungary. Patryk Szczerbiński, a first-timer and the youngest driver
has travelled around the country for more than four years now.
competing, claimed a strong tenth place in the overall results, and
The stylish American truck with its 11-metre long restaurant can
third in the Rookie category. The VERVA Racing Team finished high
be seen at the largest events in Poland, where it serves fresh cof-
up in fifth place in the team results.
fee and hot-dogs. It has taken part in such events as the Schuman
Parade, the Audioriver festival and the AIR SHOW, and its annual
As well as a sports project, the VERVA Racing Team is also a way
visit to the mountains has also become something of a tradition
to communicate a marketing message in support of VERVA fuels,
– in 2012 the truck was part of the Snow Sport Show charity
for which the prompted brand awareness in 2012 was 82%.
campaign, organised in the town of Wisła by Przemysław Saleta
to promote organ transplants.
In December 2012, the Stop Cafe brand enjoyed a recognition
level of 66%, up by 6 percentage points compared with a study
conducted 12 months earlier.
23
Location of E&P facilities
The area of land occupied
for the purposes of drilling and reservoir
stimulation work at a single location
is around 1.5-3 ha. Over this area,
drilling and fracturing equipment
is installed, and – once the exploration
phase is over – surface infrastructure
is built to treat and transmit
the extracted gas. Usually, the area
of land occupied by a production facility
is some 10 times smaller than the area
initially covered by the exploration
project (0.1-0.3 ha).
ORLEN GROUP
S T R AT E G Y
Unconventional
gas reserves
ORLEN GROUP STRATEGY
2012 saw the end of the period
of implementation of the Group’s five-year
Strategy whose objectives were achieved despite
the extremely challenging economic environment.
Fundamental changes implemented by the Group
have strengthened our potential. As a result,
we may today set ourselves the new, ambitious
objectives reflected in the updated Strategy
for the years 2013-2017, in line with our credo
’ORLEN. Fuelling the future’.
installations, as well as reduce energy intensity and improve the reliability of the units. To further enhance the value and improve the efficiency of the petrochemical segment, we completed preparations
for other profitable investment projects, to be executed in the future.
In the power segment, we signed a turn-key contract for a CCGT
unit in Włocławek. We also completed successive preparation stages
for the construction of a CCGT plant in Płock, as well as projects
involving renewable energy sources (RES).
We are the leader in shale gas exploration in Poland. In 2012,
we drilled a total of five vertical and horizontal wells, while continu-
The PKN ORLEN Strategy for the years 2008-2012 was implemented
ing our existing hydrocarbon production projects from conventional
during an exceptionally challenging period of economic slowdown,
deposits.
a deep financial crisis and deterioration in refining business conditions, especially in Europe.
Despite the objective difficulties, we managed to achieve all the Strat-
REVISION OF THE ORLEN GROUP
STRATEGY FOR 2013-2017
egy’s key objectives, including:
» Significant debt reduction through reduction of financial leverage
We strive to transform the ORLEN Group into a multi-utility supported
to below 30% and completion of one of the largest European
by three pillars: downstream (refining, petrochemicals, retail), power
M&A transactions in 2011 – the sale of Polkomtel shares;
generation and upstream.
» Completion of an investment programme in core production
assets: Diesel Oil Hydrodesulphurisation and PX/PTA plants;
» Laying of foundations for our continued development in the power
and upstream segments.
On November 30th 2012, we presented the PKN ORLEN strategic
objectives for the years 2013-2017. The three pillars of the updated
PKN ORLEN Strategy for 2013-2017 itself are:
» Shareholders – Our goal is to offer regular profit distributions
During the implementation of the 2008-2012 Strategy, the ORLEN
to our shareholders, with the dividend yield growing steadily
Group’s debt fell by over PLN 8bn. As at the end of 2012, financial
until it reaches 5% of the Company’s market capitalisation,
leverage reached 26% and the net debt/EBITDA ratio was 1.58.
calculated based on the average share price in the year preceding
We were again assigned ratings at the investment level (Fitch: BB+,
the payment;
Moody’s: Ba1), with the outlook upgraded from Stable to Positive.
» Value creation – In the area of refining, petrochemicals and sales
Thanks to the stabilisation of our financial standing, we were able
(downstream) we will focus on improving effectiveness and maxim-
to adopt a growth-oriented approach which involved planning and
ising value, while in the power generation and upstream segments
performance of the most prospective investment projects.
we plan to use our local capacities to leverage PKN ORLEN’s
strengths to create company value;
26
2012 was the first year of full utilisation of the PX/PTA complex that
» Financial fundamentals – Due to the risk of the financial crisis
was completed in 2011. The complex is the most technologically
continuing over a longer term and the volatility of the macro-
advanced installation of its kind in Europe, and one of the largest
economic environment, we place a strong emphasis on financial
industrial investment projects placed in service in Poland in recent
safety. Therefore, we plan to continue to strengthen and maintain
years. In addition, we completed a number of minor upgrade
our strong financial fundamentals by keeping financial leverage
projects designed to enhance the technical condition of existing
at a safe level of below 30%.
The updated Strategy doubles the pool of funds available for investment
PETROCHEMICALS
projects in growth areas, from PLN 7.7bn to PLN 15.1bn. In the next
five years, the ORLEN Group plans to spend up to PLN 22.5bn on nec-
The assets and position of PKN ORLEN as the largest petrochemical
essary modernisation and growth programmes. This figure comprises
company in the region and a leading producer of olefins and poly-
PLN 6.1bn on projects in the crude refining segment, PLN 4.7bn
olefins, combined with forecasts of steadily rising demand for these
in the petrochemical segment, PLN 2.4bn in the retail segment,
products in the region, create potential for continued value growth,
PLN 4.2bn in the power segment, and PLN 5.1bn in the upstream
taking into account the economic cycle.
segment (notably on shale gas).
The petrochemical segment intends to leverage PKN ORLEN’s potential
Out of the total amount of PLN 22.5bn, PLN 6.9bn will be drawn
by stepping up production at key units, enhancing olefin production
depending on a project’s economics, the Group’s financial position
efficiency and boosting polymers and PTA sales.
and the macroeconomic environment. The programme of additional
investment projects is primarily focused on the most prospective areas,
Following completion of the key investment project, the PTA plant
i.e. the power generation segment (PLN 2.4bn) and the upstream
in Włocławek, the segment will not require major development invest-
segment (PLN 2.7bn), with the remaining funds divided between
ments. Therefore its capital expenditure will be lower than in the previous
the refining segment (PLN 0.5bn), the petrochemical segment
five years, yet still at a considerable level of PLN 4.7bn. The development
(PLN 1.2bn) and the retail segment (PLN 0.1bn).
will be focused on projects with the potential to expand the highmargin product range.
REFINERY
We expect that a higher sales volume and a wider product range
The refining segment will continue to be the cornerstone of the Group’s
will increase the segment’s average LIFO-based EBITDA by PLN 1bn
business. With its state-of-the-art integrated production assets,
in 2013-2017 (relative to 2008-2012).
the refining segment allows PKN ORLEN to maintain its strong position
on the competitive market, mainly by improving the efficiency of its op-
RETAIL
erations.
Our retail business will be conducted through the largest retail netThe planned efficiency improvements in the segment will be focused
work in Central Europe. We expect a three percentage point increase
on achieving, by 2017:
in our share of home markets, with an average growth in fuel sales
» Increased crude throughput – by another 2.2 million tonnes per
per station of 0.6 million litres. We will also make efforts to increase
year to 30 million tonnes,
» Increased fuels yield to 78%,
» Reduced energy intensity by 4 marks (Solomon energy intensity
index).
our non-fuel margin by 55%.
Capital expenditure will be incurred on the development of our retail
network, including motorway sites. An important growth area will
be the expansion of our non-fuel services. Capital expenditure will
The segment’s capital expenditure in 2013-2017 is planned at PLN 6bn.
increase by PLN 0.2bn in 2013-2017 relative to 2008-2012, with
The funds will be used to optimise the operations of the refinery through
the major part of the budget financing growth-oriented expenditure.
expenditure on obligatory and overhaul projects. Growth-oriented
projects will be focused exclusively on high-profitability investments.
We expect the segment’s average LIFO-based EBITDA to increase
by PLN 0.4bn in 2013-2017 relative to 2008-2012.
We expect the segment’s average LIFO-based EBITDA to increase
by PLN 0.7bn in 2013-2017 (relative to 2008-2012).
27
ORLEN GROUP STRATEGY
POWER GENERATION
UPSTREAM
The growth prospects for the power market, combined with our
We plan to continue exploration on our prospective licences, espe-
conveniently located sites and synergies to be obtained with other
cially those with already advanced unconventional gas projects, and
segments, convinced us to continue our growth-oriented efforts
monitor on an on-going basis the possible options for participating
in this area of our business.
in attractive M&A transactions in politically stable regions.
PKN ORLEN has a wealth of experience in the field of power gene
We expect to continue to develop production operations in politi-
ration – we operate the largest in-house power generation unit
cally secure regions, such as Central Europe and North America.
in Poland that uses diesel oil and natural gas to generate electricity
Our development scenarios for the upstream segment also include
and heat. PKN ORLEN is the largest consumer of natural gas in Poland
strategic partnerships or, potentially, M&A transactions.
and an active participant in the natural gas deregulation process.
Our shale gas exploration projects carried out based on the obtained
Due to the favourable market environment (expected surplus
licences are our priority. Production can start as soon as 2016,
of demand over supply) and certain internal factors (conveniently
to reach 160 million cubic meters in the following year. We will
located sites, potential synergies), the development of the power
also produce crude oil, with an in-house production volume that
generation segment has become one of the pillars of the updated
could reach 1 million barrels in 2017.
Strategy.
We expect the upstream segment to become profitable in the time
We spent PLN 1.6bn on the construction of the most advanced CCGT
horizon of the 2013-2017 Strategy. In 2017, we expect to generate
plant, in Włocławek. We expect to spend an additional PLN 2.4bn
an additional LIFO-based EBITDA of PLN 0.4bn from those operations.
on such projects as a CCGT plant in Płock, a CHP plant in Litvinov
and RES (depending on the final parameters of the projects and
Capital expenditure in the upstream segment will reach at least
our financial position).
PLN 2.4bn and will be used to finance shale gas exploration and
production drilling. Another PLN 2.7bn will be used to finance
28
We plan to generate stable, positive cash flows from the power
the extension of the production phase, as well as additional licences
generation segment as early as in 2016. We expect the segment’s
and/or M&A options (depending on the final parameters of the pro-
LIFO-based EBITDA to reach PLN 0.3bn in 2017.
jects and our financial position).
29
Exploration
Exploration for hydrocarbons
is a long-term process which requires
a number of surveys, the results of which
serve as the basis for identifying
the location of hydrocarbon accumulations,
their volume and the economic viability
of their extraction. As part of the exploration
work seismic surveys are conducted,
a technique used in the oil and gas
industry for over 80 years.
Geological maps
Seismic data cannot be gathered without
specialised equipment, including trucks
carrying apparatus that produce vibrations
and geophones which register seismic
waves. Data gathered using such equipment
is then processed and interpreted to obtain
information on the structure of the Earth’s
crust. This information is then used
to draw geological maps of areas which
are likely to contain hydrocarbon
accumulations.
BUSINESS
OVERVIEW
Seismic
Surveys
BUSINESS OVERVIEW
We are the largest producer and distributor of fuels,
refining products and petrochemicals
in Poland. Our business consists in the processing
of crude oil into unleaded gasolines, diesel oils,
fuel oils and aviation fuel, as well as plastics and other
petrochemical products. The seven refineries operated
by the Group in Poland, the Czech Republic and
in Lithuania have a total throughput capacity
of nearly 28 million tonnes. We have also been
investing in new business areas – we are actively
engaged in exploration for oil and gas and we have
been developing our power generation segment.
FUELS
Despite a difficult market environment, the Group has managed
to keep its crude processing volumes relatively stable compared with
the previous year. Crude processing volume was higher by 4.4%
at PKN ORLEN and remained unchanged at Unipetrol. At ORLEN
Lietuva it was 5.3% lower, mainly as a consequence of the periodic
maintenance shutdown of the refinery.
The pillars of development of the refining segment include efficiency
improvement (higher processing volume and fuel yield, reduced energy
intensity), strengthening of its value through optimum expenditure
on overhauls and obligatory investments, and implementation of high-
REFINERY
yield development projects.
In 2012, the ORLEN Group managed seven refineries, located in Poland
Core aspects of the development of the refining segment include
(Płock, Trzebinia, Jedlicze), in Lithuania (Mažeikiai), and in the Czech
efficiency improvement, strengthening of the refinery’s value through
Republic (Litvinov, Kralupy and Pardubice). In 2012, crude oil processing
optimum expenditure on overhauls, and implementation of high-yield
at the Pardubice refinery was discontinued.
development projects.
Our largest refining and petrochemical production complex, located
The refining industry is facing a number of challenges which are
in Płock, is ranked among the most advanced integrated production
having a significant impact on its long-term strategic prospects. Con-
facilities in Europe. In 2012, the crude processing volume at the Płock
sumption of fuels is expected to further decline in Europe. By 2030
refinery reached 15.2 million tonnes.
consumption of crude oil is set to decrease by about 20% relative
to the demand for this commodity seen in 2010. Key factors curbing
The Mažeikiai refinery is the only refinery in the Baltic States (Lithuania,
demand in Europe include emission reductions and the increased
Latvia, Estonia). In 2012, it processed 8.5 million tonnes of crude oil.
energy efficiency of the European economy, both industrial and
The current production capacities of the Lithuanian refinery consider-
household, as well as an ageing society.
ably surpass the local market’s demand, which enables ORLEN Lietuva
to sell a significant portion of its production to foreign markets.
Another important tendency affecting the economics of the industry
is the structural change in demand. In the Central European markets,
In the Czech Republic, crude oil is processed by Česká Rafinérská, a.s.,
2012 was another year of increasing oversupply of gasolines and
which operates refineries in Kralupy and Litvinov. In 2012, these two
a deficit of diesel oils. Demand for diesel oil is expected to continue
refineries processed a total of 3.9 million tonnes of crude. The Czech
growing until 2020.
market’s demand is met mostly by local production; only in the case
of aviation fuel are growing market needs partly supplemented
The decline in demand for gasolines is attributable both to lower
by imports.
internal demand and lower exports (mainly to the USA). The imbalance between supply and demand implies the need for further
As part of our restructuring activities in the Czech Republic, we per-
investments in the refining industry.
manently ceased crude processing at the Paramo refinery. This decision
was one of the elements in the restructuring of this company’s assets.
2012 was also a year of intense discussion about the future of the oil
In 2012, we carried out the spin-off of the Paramo bitumen trading
industry in Europe. The entire sector in Europe is facing competition
business into a new company, Paramo Asfalt, and the acquisition
from Asian and US corporations; the product inflow from those
of Paramo Asfalt by ORLEN Asfalt.
parts of the world is putting additional pressure both on margins
and on capacity utilisation.
32
Poland
In the second quarter of 2012, we signed an agreement with
Honeywell for implementation of Advanced Process Controls (APC)
Płock
in the reactor section of the Hydrocracking Unit and in the Cata-
In October 2012, we processed the 500 millionth tonne of crude
lytic Cracking II Unit. We expect implementation of this project
oil at our Płock refinery.
to be completed in mid-2013.
Projects completed in 2010-2012 focused on augmenting the re-
In September 2012, we completed tests in the Gudron Hydrodesul-
finery’s processing capacities, improving the quality characteristics
phurisation Unit, the aim of which was to investigate the potential
of the feedstock used, and aligning our production with environ-
to produce a greater volume of white products. We also continued
mental requirements as far as emission of pollutants is concerned.
the upgrading and restoration of the refinery’s product tanks.
Key developments included commissioning of the new Diesel Oil
Hydrodesulphurisation Unit VII and a new Claus Unit, as well as up-
Fuel production
grading the Hydrogen Fluoride Alkylation Facility and construction
of the OOG 420 Fuel Oil and Natural Gas Fired Boiler.
Fuel producers who ensured in their annual supply structure a minimum share of 70% of biocomponents meeting the criteria set forth
In 2012, we also continued the energy efficiency improvement
in the Act on Biocomponents and Liquid Biofuels, could in 2012 take
programme at the Płock refinery. We identified over 130 efficiency
advantage of a lowered National Indicative Target (NIT) of 5.65%
initiatives which will be implemented until 2017. In 2012 alone,
based on energy content. As PKN ORLEN met all the relevant criteria,
the projects we carried out in this respect generated benefits of over
we took advantage of the lowered NIT level, whose standard value
PLN 30 million (based on 2012 prices).
Volumes of crude oil processed by the ORLEN Group by country in 2011-2012 (’000 tonnes)
CHANGE
2011
» » » 2012
2012/2011
14,836
15,479
4%
Refineries in the Czech Republic
3,942
3,927
0%
Refinery in Lithuania
9,007
8,533
-5%
27,785
27,939
1%
2011
» » » 2012
2012/2011
14,547
15,191
4%
Total gasolines
2,469
2,491
1%
Total diesel oils
5,646
5,829
3%
Light fuel oil
372
745
100%
Aviation fuel
393
388
-1%
Propane-butane fraction
186
225
21%
9,066
9,678
7%
76.1
77.0
0.9 p.p.
Refineries in Poland
Total
Production volumes of selected refining products in 2011-2012 (Płock, ‘000 tonnes)
Crude processing
Total fuels
Fuel yield (%)
CHANGE
33
BUSINESS OVERVIEW
in 2012 was 6.65% based on energy content. In total, in 2012,
In 2012, the refinery produced 122 thousand tonnes of fatty acid
as part of implementation of the NIT, we marketed:
methyl esters, which are a biocomponent added to conventional diesel
» 2,316.8 thousand tonnes of gasolines with biocomponents,
» 6,171.0 thousand tonnes of diesel oils with biocomponents,
oil. These FAMEs were also used as an independent fuel, sold under
including:
The Trzebinia Refinery was also engaged in the production of paraffin
» 155 thousand tonnes of ethanol in gasolines,
» 389 thousand tonnes of methyl esters in diesel oils,
» 45.7 thousand tonnes of esters constituting a self-contained
waxes, thanks to its paraffin wax installation, brought online in 2005 and
BIO100 fuel,
the trade name of Bioester, and commonly referred to as BIO100.
unique in this part of the continent. This makes the Company the most
technologically advanced paraffin waxes industry operator in Central
and Eastern Europe. In 2012, paraffin waxes production volume was
» 15.3 thousand litres of BIO85 (as part of a pilot scheme).
nearly 44.9 thousand tonnes – 3.0 thousand tonnes down on 2011.
Trzebinia
Operational safety and the highest product quality in this segment
The activities of the Trzebinia Refinery in 2012 focused on ensuring
are made possible thanks to modern installations, highly qualified,
competitiveness and appropriate efficiency of its operations in key
experienced staff and selection of the best suppliers to provide
business areas, including production of biofuels, crude processing,
the refinery with top quality raw materials. In the case of paraffin
hydrorefining of paraffin waxes and fuel terminal services.
waxes, the slack waxes supply agreement with ORLEN OIL gives
the refinery access to production input of excellent quality, while
Modifications to certain components of the BIO installation, cost and
concurrently building the ORLEN Group’s value chain.
technological optimisation, as well as monitoring of the production
processes, enabled us to exceed the nameplate capacities of the re-
Jedlicze
finery’s installations. In the coming years, further optimisation and
The Jedlicze Refinery concentrates production in three main product
upgrading of the installations are planned, to improve the refinery’s
groups: fuel oils (54%), base oils (21%) and solvents (17%). Light
ester production capacities.
fuel oils are manufactured under a licence from PKN ORLEN and are
all sold to the Group’s terminals. Heavy fuel oils are sold to power
plants and CHP plants or are used in production of bituminous mixes.
Production volumes of selected refining products in 2011-2012 (Trzebinia, ‘000 tonnes)
CHANGE
2011
» » » 2012
2012/2011
Crude processing
234
230
-2%
Biofuels production plant
129
135
5%
Rapeseed oil methyl esters
116
122
5%
2011
» » » 2012
2012/2011
Crude processing
55
58
5%
Processing of spent oils
40
60
50%
Heavy oils
34
38
12%
Light fuel oil
41
29
-29%
Regenerated base oils
19
27
42%
Solvents
21
21
0%
Production volumes of selected refining products in 2011-2012 (Jedlicze, ‘000 tonnes)
34
CHANGE
Base oils are obtained by regenerating spent oils, and are mainly
value and its competitiveness. We placed considerable emphasis
bought by Polish and foreign producers of gear oils and lubricants.
on energy efficiency, labour efficiency and the refining facilities’
The Jedlicze Refinery is currently the sole producer of low-sulphur,
capacity utilisation ratio.
low-aromatic kerosene solvents in Poland. These are manufactured
in a modern installation using the most advanced catalytic hydrogen
Lithuania
processes which remove unwanted substances from the solvents,
such as carcinogenic benzene and sulphur compounds harmful
In 2012, we reported a 5% decline in the volume of crude processed,
to the environment.
which was attributable to the historically largest general overhaul
of the refinery, performed in the second quarter of the year. The fuel
Czech Republic
yield was maintained at 75%. Concurrently, we proceeded with
the construction of the sulphur degassing and granulation unit,
In 2012, the volume of crude processed in the Group’s Czech refineries
which is necessary to ensure the refinery’s legal compliance, as well
remained relatively flat compared with the previous year. A number
as with implementation of a VCP programme, the aim of which
of programmes and projects were implemented in the discussed
is to enhance the Company’s value by lowering the energy intensity
period, the objective of which was to raise both the Company’s
of the Mažeikiai refinery.
Output of selected refining products in 2011-2012 (Unipetrol, ‘000 tonnes)
CHANGE
2011
» » » 2012
2012/2011
3,942
3,927
0%
Total gasolines
748
787
5%
Total diesel oils
1,732
1,741
1%
Light fuel oil
54
29
-46%
Aviation fuel
80
91
14%
Liquefied gas
153
155
1%
2,767
2,803
1%
77.9
79.0
1.1 p.p.
2011
» » » 2012
2012/2011
9,007
8,533
-5%
468
554
18%
Total inputs
9,475
9,087
-4%
Total gasolines
2,781
2,548
-8%
Diesel oils
3,682
3,618
-2%
9
10
11%
JET fuel
275
253
-8%
LPG
248
221
-11%
6,995
6,650
-5%
74.8
75.0
0.2 p.p.
Crude processing
Total fuels
Fuel yield (%)
Production volumes of selected refining products in 2011-2012 (ORLEN Lietuva, ’000 tonnes)
Crude processing
Other inputs
Light fuel oil
Total fuels
Fuel yield (%)
CHANGE
35
BUSINESS OVERVIEW
BITUMENS
business, in 2012 Paramo Asfalt was spun out of Paramo to manage the marketing of bitumens produced in the Czech Republic
In 2012, ORLEN Asfalt reported record sales, with more than 800
(Litvinov and Pardubice) and Poland (Płock and Trzebinia). In October
thousand tonnes of bitumens placed on the Polish and international
2012, ORLEN Asfalt acquired a 100% interest in Paramo Asfalt and
markets. The company managed to expand its share in the shrink-
changed its name to ORLEN Asfalt Česká republika.
ing domestic market and grow its export business by over 70%.
The principal export destination in 2012 was Romania, where ORLEN
Lithuania
Asfalt doubled its sales year on year.
In 2012, production of paving grade bitumens in Lithuania fell 12%
We were also an active participant in the bitumens market in the Czech
year on year, due to lower sales in Poland, Lithuania, and Estonia.
Republic. As part of the consolidation of the ORLEN Group’s bitumen
Over the same period, the share of sales to the Latvian market
advanced by 6%.
ORLEN Asfalt sales volume in 2011-2012 (’000 tonnes)
CHANGE
2011
» » » 2012
2012/2011
788.89
788.81
-0.01%
15.57
16.18
3.92%
804.47
804.99
0.06%
2011
» » » 2012
2012/2011
209
180
-13.88%
Modified bitumens
8
7
-12.50%
Industrial bitumens
30
28
-6.67%
259
215
-16.99%
2011
» » » 2012
2012/2011
3.9
0.4
-89.74%
Lithuania
69.9
62.3
-10.87%
Latvia
34.2
36.5
6.73%
Estonia
24.3
15.9
-34.57%
Paving grade bitumens
Industrial bitumens
Total (bitumens and other products)
Paramo bitumen sales volume in 2011-2012 (’000 tonnes)*
Paving grade bitumens
Total (bitumens and other products)
CHANGE
* including production from the Litvinov refinery
ORLEN Lietuva bitumen sales volume in 2011-2012 (’000 tonnes)
Poland
36
CHANGE
OILS
ORLEN OIL’s main strength is its broad suite of Platinum-branded
synthetic and mineral motor oils for passenger cars with petrol
Our oils business, led by the ORLEN OIL Group (in Poland) and
and diesel engines. This comprehensive product range was ad-
Paramo (in the Czech Republic), reported a sales volume of 471
ditionally expanded in 2012 to include premium-grade Platinum
thousand tonnes in 2012, which represented a 3% improvement
MaxPower 0W-30 and Platinum MaxPower 0W-40 motor oils.
on the previous year.
In 2012, we enhanced our advanced Platinum MaxExpert line, which
is produced for particular car makes.
Poland
The blending plant modernisation project in Trzebinia progressed
Despite a weak economy and shrinking demand from business
on schedule in 2012, ensuring that the cost optimisation process
customers, ORLEN OIL was able to increase its sales of lubricants,
of the adopted lubricants allocation scheme continued smoothly.
base oils, slacks, extracts, and other products by 8% in 2012.
The next stage of the plan is to modernise the lubricants blending
plant in Jedlicze. The plant has taken the first steps in shifting its
ORLEN OIL, with a 27.5% market share, is at the forefront of the Pol-
production towards specialised auto chemicals and oils (emulsifying
ish lubricants industry. In 2012, the company delivered strong domestic
oils, HYDROKOP semi-synthetic emulsifying concentrates).
sales and expanded its international market shares.
In 2012, the crystallisers dilution system in the MEKTOL solvent dewaxThe lubricants business is seeing a shift towards higher quality mo-
ing unit at the Płock plant was modified to increase output and process
tor oils. This trend is visible in products for the automotive industry
efficiency. These efforts, combined with use of APC in the FURFUROL
and for agriculture.
unit and increased throughput capacity of the MEKTOL unit, helped
reduce energy consumption and, therefore, production costs.
ORLEN OIL sales volume in 2011-2012 (’000 tonnes)
CHANGE
2011
» » » 2012
2012/2011
Lubricants
91
92
1%
Base oils
76
78
3%
Other products
193
218
13%
Total
360
388
8%
2011
» » » 2012
2012/2011
Lubricants
92
95
3%
Base oils*
147
163
11%
Other products
184
201
9%
Total
423
459
9%
ORLEN OIL production volume in 2011-2012 (’000 tonnes)
CHANGE
* base oils production volume includes production for internal use
37
BUSINESS OVERVIEW
Czech Republic
In 2012, demand on the Czech oils market remained low due
to a difficult economy. Paramo’s total output of lubricants in 2012
was 35 thousand tonnes, down 29% year on year.
Despite a year-on-year drop in total sales, Paramo managed to increase
its sales in the most competitive segment of motor oils by 4.5%.
Paramo oils production volume in 2011–2012 (’000 tonnes)
CHANGE
2011
» » » 2012
2012/2011
Lubricants
49
35
-29%
Base oils*
70
56
-20%
Process oils
16
15
-6%
Other products
14
13
-7%
149
119
-20%
2011
» » » 2012
2012/2011
Lubricants, base oils and Process oils
85
71
-16%
Other products
14
12
-14%
Total
99
83
-16%
Total
* base oils production volume includes production for internal use
Paramo sales volume in 2011-2012 (’000 tonnes)
38
CHANGE
PETROCHEMICALS
The Unipetrol Group is a leading producer of petrochemicals
in the Czech Republic. Its main petrochemical production comes
We rank among the largest petrochemical companies in Central and
from the Litvinov-based polyolefin and olefin units, which have an
Eastern Europe and are widely recognised for our premium quality
annual capacity of approximately 600 thousand tonnes and 540
products and efficient distribution network.
thousand tonnes, respectively.
We are the only producer of olefins, polyolefins (polyethylene and
The ANWIL Group, ranking among the largest chemical companies
polypropylene), PTA and most other petrochemicals in Poland and
in Central Europe, is the leading producer of polyvinyl chloride
the Czech Republic.
(PVC), and one of the leading producers of sodium hydroxide
and fertilisers in Poland. The ANWIL Group’s production capac-
In 2012, petrochemical operations were carried out by the Petro-
ity totals 1,160 thousand tonnes of nitrogen fertilisers, approxi-
chemicals Plant in Płock, the PTA Plant in Włocławek, the Unipetrol
mately 560 thousand tonnes of PVC and granulates, approximately
Group, the ANWIL Group and Basell Orlen Polyolefins (BOP). Key
360 thousand tonnes of sodium hydroxide, and approximately
to our petrochemicals business is the olefin unit with a maximum
50 thousand tonnes of caprolactam. The Group’s products are sold
annual capacity of 700 thousand tonnes of ethylene and 380 thou-
on local markets and exported.
sand tonnes of propylene. Fully integrated refining and petrochemical
units at PKN ORLEN and pipeline infrastructure linking the units with
Basell Orlen Polyolefins specialises in polymer production, operat-
the ANWIL Group’s and BOP’s plants is a major source of competitive
ing polyethylene and polypropylene production units with a total
advantage in this segment. PKN ORLEN-produced monomers are
annual capacity of 820 thousand tonnes. The company’s products
a feedstock for the polymer units at Basell Orlen Polyolefins and
are placed on the Polish and international markets, where they are
the PVC unit at the ANWIL Group. Other petrochemical products
used in a wide variety of applications, including in the production
are sold to customers on the domestic market and abroad (including
of packaging, films, fibres, textiles, and auto parts.
in the Czech Republic, Denmark, Germany, and Lithuania).
ORLEN Group petrochemical sales volume in 2011-2012 (’000 tonnes)
» » 2012
2011
Polyethylene
Poland
Czech
Republic
Total
Poland
Czech
Republic
179
261
440
167
288
Total
455
Polypropylene
167
212
379
162
237
399
Ethylene
189
102
291
171
111
282
Propylene
169
39
208
164
38
202
PTA
336
—
336
484
—
484
Benzene
159
202
361
205
367
Acetone
26
—
26
22
—
22
Butadiene
67
59
126
58
67
125
162
Glycol
79
1
80
68
—
68
Ethylene oxide
28
—
28
27
—
27
Phenol
PVC and PVC processing
Fertilisers
Other
Total petrochemicals
41
—
41
35
—
35
385
11
396
353
16
369
1,115
175
1,290
1,142
175
1,317
479
587
1,066
472
609
1,081
3,419
1,649
5,068
3,487
1,746
5,233
39
BUSINESS OVERVIEW
PETROCHEMICAL PRODUCTS
One factor determining the volume of petrochemical production
in 2012 was the planned maintenance shutdown of all main petro-
In 2012, the most important event for our petrochemical segment
chemical installations at PKN ORLEN’s Płock and Włocławek locations,
was the planned maintenance shutdown in Płock and Włocławek.
as well as of supporting feedstock-providing installations at Basell
Despite the downtime, the Group’s petrochemical subsidiaries in Poland
Orlen Polyolefins and ANWIL’s Plastics Department.
and the Czech Republic produced more than 954 thousand tonnes
of ethylene – 1% less than in 2011. Propylene output in the period
In terms of the scope of work and the number of units shut down
under review totalled 628 thousand tonnes, up by approximately
for maintenance, the operation was the largest of its kind in our
1% compared with the previous year.
history. In 2012, we also completed process intensification in Ethylene Oxide Unit II, which helped increase the unit’s annual capacity
In 2012, sales by volume recorded by our petrochemical business inched
from 76 thousand tonnes to 95 thousand tonnes of ethylene oxide.
up 3.3% on 2011. The rise was led by higher sales of PTA (up 44%
to 484 thousand tonnes) and higher sales of polymers in Unipetrol
The output of terephthalic acid (PTA), used mainly in the production
RPA (up 11.0% to 525 thousand tonnes), with the latter representing
of PET granulate, was almost 470 thousand tonnes. Key customers
30% of total petrochemical sales achieved by the Unipetrol Group.
for our PTA come from Germany, Russia, Oman, Lithuania, Turkey,
and China. The volume of PTA sold in 2012 totalled 484 thousand
Poland
tonnes, having risen by 44% after an intensified sales effort in Turkey
and Russia and following our entrance into Middle Eastern markets.
In 2012, sales by volume reported by the Group’s petrochemical
subsidiaries rose 2% year on year, mainly on the back of continued
We also recorded an almost 2% rise in sales of benzene as additional
growth in sales of PTA (484 thousand tonnes sold). We focused
quantities of the product, sourced from the paraxylene (PX) unit
our efforts on maximising sales to increase capacity utilisation and
launched in 2011, were placed on the market and as we were able
optimise product prices.
to keep a stock of the product, which helped us mitigate the effects
of the maintenance downtime in Q3 2012.
Total production volume of selected petrochemicals at PKN ORLEN in 2011-2012 (’000 tonnes)
» » » 2012
2012/2011
Ethylene*
555
513
-8%
Propylene**
359
344
-4%
67
57
-15%
Benzene
201
197
-2%
Toluene
193
190
-2%
Phenol
41
35
-15%
Acetone
26
22
-15%
Glycols
87
74
-15%
Coolants
10
7
-30%
Ethylene oxide
27
27
0%
365
470
29%
Butadiene
PTA
* total production for external sales and internal use
** total propylene production at the Płock plant
40
CHANGE
2011
The recovery of the artificial fertiliser market in the first half of 2012
The situation on the Czech market was similar to the rest of Europe,
fuelled an almost 2% year-on-year rise in sales.
with the prices of crude and crude oil products counting as the key
factor determining actual prices of petrochemical products and overall
The largest customers for our petrochemical products were producers
cost efficiency of petrochemical production. The agrochemical market
of plastics (polyethylene, polypropylene, PVC, and PET). Other key
was marked by fluctuations in demand and prices. Similar to previ-
customers included producers of synthetic rubbers, polyester fibres,
ous years, most of the ammonia produced by Unipetrol RPA was
ethoxylates (used as intermediates in the production of surface ac-
sold on the local market. Over 90% of the total output was sold
tive agents), polyols, caprolactam, phenolic resins, coolants, phthalic
under a long-term contract with the largest fertiliser manufacturers
anhydride, and fertilisers.
in the country.
Our petrochemical products were also sold to customers in neighbour-
2012 was the last year of urea production. As of January 2nd 2013,
ing countries, including Germany, Russia, Lithuania, Czech Republic,
Unipetrol RPA has permanently discontinued urea production, as part
Slovakia, as well as in Turkey, Hungary, and Romania. In 2012, our
of its 2013 cost optimisation programme. In 2012, the share of ex-
petrochemicals (PTA) sales coverage was expanded to include coun-
ports in total sales of urea was 35%.
tries in the Middle East.
Unipetrol RPA’s petrochemicals have found application in the textile
Czech Republic
and food industries, and in the manufacture of packaging, houseware and toys.
Production at the Czech-based Unipetrol RPA plants amounted to over
441 thousand tonnes of ethylene, which is 7% more than in 2011.
Propylene output in the period under review totalled 284 thousand
tonnes, up by approximately 8% compared with the previous year.
One of the reasons for the rise in output was our maintenance
shutdown, as part of which key process units are overhauled every
four years (the most recent operation took place in H2 2011).
Production volume of selected petrochemicals at Unipetrol RPA in 2011-2012 (’000 tonnes)
CHANGE
2011
» » » 2012
2012/2011
Ethylene
412
441
7%
Propylene
264
284
8%
Benzene
199
204
3%
Urea
170
174
2%
Ammonia
223
232
4%
Sales allocation of Unipetrol RPA’s key petrochemicals in 2012 (%)
Ethylene
Propylene
Benzene
Ammonia
Urea
Domestic sales
80
31.2
100
90.1
64.9
Export sales
20
68.8
—
9.9
35.1
41
BUSINESS OVERVIEW
PLASTICS
In 2012, the two-millionth tonne of polyolefins produced by Basell
Orlen Polyolefins’ new process units was sold on the Polish market.
In 2012, the ORLEN Group’s polyolefin production volume was 2%
Almost half (49%) of plastics originating from Płock were placed
less than in the previous year. Polypropylene production totalled
on the domestic market, with the balance distributed through
559 thousand tonnes, up 1% year on year. In the period under
LyondellBasell’s supply chain system in Europe. In 2012, key customers
analysis, the Polish- and Czech-based units produced a total of 605
for products made in Płock came from Germany, Italy, France, Belgium,
thousand tonnes of polyethylene, which represented a 4% drop
Sweden, Russia, and Spain. Last year, we engaged in commercial pro-
compared with 2011.
duction of a new line of polypropylenes (random copolymers), which
takes place in the Spheripol process unit. The principal application
Poland
for the new type of plastic is in the production of plastic bottles
with high transparency and gloss.
The production volume of Basell Orlen Polyolefins (BOP) was 51 thousand tonnes less than in 2011. A 45-day maintenance shutdown
Czech Republic
of the Spheripol and Hostalen units, the longest such downtime
since their launch, was one reason why 2012 was shorter in terms
The share of exports in total sales was 72% for HDPE and 43% for
of unit working days than 2011.
PP. A relatively large share of exports was an outcome of a consistent marketing strategy, aimed at allocating a maximum volume
BOP polyolefin production volume in 2011-2012 (’000 tonnes)
CHANGE
2011
» » » 2012
2012/2011
Low-density polyethylene (LDPE)
98
87
-11%
High-density polyethylene (HDPE)
267
240
-10%
Polypropylene (PP)
337
324
-4%
Total
702
651
-7%
2011
» » » 2012
2012/2011
265
244
-8%
BOP polyolefin sales volume in 2011-2012 (’000 tonnes)
HDPE
LDPE
CHANGE
94
89
-5%
PP
334
323
-3%
Total
693
656
-5%
2011
» » » 2012
2012/2011
Unipetrol polyolefin production volume in 2011-2012 (’000 tonnes)
CHANGE
HDPE
268
278
4%
PP
219
235
7%
Total
487
513
5%
2011
» » » 2012
2012/2011
HDPE
261
288
10%
PP
212
237
12%
Total
473
525
11%
Unipetrol polyolefin sales volume in 2011-2012 (’000 tonnes)
42
CHANGE
of products to markets offering the strongest profit margins. Unipetrol
mainly to EU countries. The bulk of the PVC is sold on the Polish
RPA managed to partly disintermediate its polymer sales, which
market, while the Czech market does not account for a significant
additionally bolstered margins.
share of PVC sales. Sales of this product are strongly driven by changes
in economic conditions. PVC is mainly used in the construction sector
In 2012, Unipetrol increased production of HDPE and polypropylene
to produce, for instance, sewage piping, door and window joinery,
by 4% and 7% respectively. Sales of HDPE and polypropylene grew
window sills, power cable insulation, carpeting and wall cladding.
10% and 12% respectively, on the previous year, with export volumes
having increased by 10% and 25% respectively.
CHEMICALS
NITROGEN FERTILISERS
The ANWIL Group produces nitrogen fertilisers for use in agriculture.
Its product range includes ammonium nitrate and CANWIL calcium
ammonium nitrate (produced by ANWIL), as well as ammonium
The key companies in the chemical segment in 2012 were ANWIL
sulphate (produced by Spolana). The Group’s production capacity
(Poland) and Spolana (Czech Republic), which manufacture mainly:
is 1,190 thousand tonnes of nitrogen fertilisers in bulk. In 2012,
»
»
»
»
»
polyvinyl chloride
ANWIL Group plants produced a total of 1,141 thousand tonnes
sodium hydroxide
of nitrogen fertilisers (up by approximately 4% on 2011). ANWIL’s
granulates and PVC-based mixes
nitrogen fertilisers are sold mainly on the Polish market. The balance
nitrogen fertilisers
is sold to other EU countries. Spolana’s ammonium sulphate was
caprolactam
sold mainly on the Czech and Polish markets, as well as in other
EU countries.
POLYVINYL CHLORIDE
Early April 2012 saw the introduction of a new gas tariff, under
ANWIL and Spolana are the only PVC producers on the Polish
which the gas price payable by ANWIL and other chemical companies
and Czech markets, respectively. The ANWIL Group’s PVC pro-
in Poland was increased by more than a dozen percent. This had
duction capacity is 475 thousand tonnes (340 thousand tonnes
an adverse effect on fertiliser production costs.
in Włocławek and 135 thousand tonnes in Neratovice). PVC is sold
ANWIL’s production volume in 2011-2012 (’000 tonnes)
Polyvinyl chloride
PVC processing
Sodium hydroxide (100% in NaOH equivalent)
CHANGE
2011
» » » 2012
2012/2011
276
256
93%
50
53
106%
135
144
107%
Nitrogen fertilisers (in nitrogen equivalent)*
277
294
106%
Total
738
747
101%
2011
» » » 2012
2012/2011
99
94
95%
* Includes ammonium nitrate and CANWIL
Spolana’s production volume in 2011-2012 (’000 tonnes)
Polyvinyl chloride
CHANGE
Sodium hydroxide (100% NaOH equivalent)
72
70
97%
Caprolactam
46
45
98%
Ammonium sulphate (in nitrogen equivalent)
44
43
98%
261
252
97%
Total
43
04
Data analysis
A decision on the location of an exploration
and appraisal well is made following
an analysis of archival data (well log
and seismic data), as well as new seismic
surveys. Only if the results of appraisal
work prove promising are further stages
implemented.
Core samples
To collect shale rock samples for analysis,
a vertical exploration and appraisal well
is drilled. If the results of the core sample
analysis are positive, a decision to continue
work is made. A horizontal well is then
drilled, following which production
is stimulated by such treatments
as hydraulic fracturing, aimed at making
gas flow from the rock to the borehole
in order to measure the hydrocarbon
flow rate.
SALES
Shale
rock sample
SALES
We have a significant share in wholesale
and retail sale of motor fuels in Poland.
We operate Central Europe’s largest network
of modern service stations, located in Poland,
Germany, the Czech Republic and Lithuania.
What makes us stand out is not only the top
quality of our fuels and other products,
but also the excellent service level, the wide
variety of food and drink on offer at our
stations, as well as having the leading loyalty
and fleet programme in the region.
In 2012, PKN ORLEN stored oil stocks in the salt caverns of IKS ‘Solino’
as well as in the surface storage depots in Płock. Fuel stocks were
kept in more than twenty locations across Poland, mainly in surface
terminals owned by the ORLEN Group, surface storage depots
leased from third parties, as well as in the underground salt caverns
of IKS ‘Solino’.
In 2012, we continued efforts aimed at changing the terms governing
the keeping of a portion of mandatory oil stocks. We also entered
into two contracts for the sale of a portion of crude oil stocks,
engaging a third party to maintain the stocks, with guaranteed continued performance of the stock-keeping obligation by PKN ORLEN.
LOGISTICS
In 2012, the Ministry of Economy continued legislative activities
on a planned amendment to the law on domestic intervention
A well-functioning logistics infrastructure is a guarantee of national
stocks. Our representatives have also been active participants in such
energy security and the source of our competitive edge on the fuel
projects as the development of proposed corrections to the draft,
market. The key to effective logistics is maximised efficiency and
formally presented by the Ministry of Economy.
smooth flow of transport and storage of both products and raw
materials.
Czech Republic
We achieve this using a network of complementary infrastructure
In accordance with the legislation of the Czech Republic, manda-
components: fuel terminals, on-shore and off-shore handling termi-
tory stocks of fuel and crude oil are maintained by a dedicated
nals, a network of product and raw material transmission pipelines,
government agency.
as well as road and railway transport.
Lithuania
The key links in the Group’s are ORLEN KolTrans and ORLEN
Transport in Poland, and Unipetrol Doprava and Unipetrol Petro-
At the end of 2012, the required level of mandatory stocks in Lithu-
trans in the Czech Republic.
ania was 90 days, with ORLEN Lietuva and companies importing fuel
to Lithuania keeping 60-day stocks (30-day stocks were maintained
MANDATORY STOCKS
Poland
Legal regulations oblige companies and traders operating on the Polish oil and fuel market to keep mandatory stocks. In 2012, just
as in 2011, the mandatory stock-keeping level was the equivalent
of at least 76 days of the producer’s or trader’s average daily production or import, as appropriate, in the previous year. Maintaining
14-day stocks was the obligation of the Material Reserves Agency.
46
by an appropriate Lithuanian state agency).
PIPELINES
Logistics infrastructure used by the ORLEN Group
in Poland
Poland
S³awno
An important aspect of ensuring secure oil supplies is an efficient
and cost-effective national product distribution system. Compared
to other modes of transport used in product distribution, pipeline
transport is characterised by lower unit costs and higher capacity.
In addition, it is also the safest mode of transport, guaranteeing
Gdañsk
Gutkowo
Świnoujście
Sokó³ka
Szczecin
Nowa Wieś Wielka
PKN ORLEN
Rejowiec
Emilianów
IKS
Solino
Nowa Sól
Mościska
Ostrów Wlkp.
Koluszki
Boles³awiec
the lowest losses in the logistics chain.
Lublin
Boronów
TanQuid
Wroc³aw
Wide³ka
Rafineria Trzebinia
In 2012, in Poland, the Czech Republic and Lithuania, the ORLEN
¯urawica
Olszanica
Group used a network of owned or leased pipelines, with a total
length of more than 2.1 thousand kilometres, to transport raw
materials and products.
As in the previous year, in logistics activities in Poland in 2012 we used
the 379 km of our own pipelines and 570 km of product pipelines
owned by the state-owned operator PERN Przyjaźń SA. The share
of pipeline transport in overall distribution of petroleum products
from the Płock refinery is growing steadily each year.
Thanks to the construction of the Ostrów Wielkopolski-Wrocław
Polska
P³ock Production Plant
PKN ORLEN fuel terminals – 14
OLPP terminals – 5
ROP terminals – 3
IKS ‘Solino’
TanQuid Radzionków
PERN Przyjaźñ raw material pipelines
PERN Przyjaźñ product pipelines
PKN ORLEN pipelines
section of the pipeline for transporting petroleum products (opened
in early 2011), as well as expansion of storage capacity and the launch
of a system for dispensing ethanol to gasoline BB95 at the fuel
terminal in Wrocław, the terminal’s distribution capacity was signi
in the Czech Republic
ficantly increased and costs were optimised.
Litvinov
Structure of liquid fuel shipments from Płock in 2012 (gasolines,
diesel oil, light fuel oil, JET A-1):
» pipeline – 72%
» railway – 21%
» road tankers – 7%
Cerekvice
Roudnice
Mstetice
Hajek
Pardubice
Potehy
Kralupy
Sedlinice
Slapanov
Tresmona
Beldce
Velka Bites
Strelice
Smyslov
Plesovec
Loukov
Klobouky
Vcelna
Czech Republic
Bratyslava
As in previous years, in 2012 the Unipetrol Group used 1.1 thousand
km of product pipelines owned by state-owned operator CEPRO,
while raw materials were transported via the Druzhba and IKL
pipelines, operated in the Czech Republic by state-owned MERO.
The length of the Druzhba and IKL pipelines in the Czech Republic
is 357 km and 169 km, respectively.
Czechy
Ceska Rafinerska Refineries
CEPRO storage depots
(capacity of 280,000 m�)
MERO raw material pipelines
CEPRO product pipelines
(ca. 1,000 km)
47
SALES
In 2012, the fees paid by Unipetrol to operator MERO for crude oil
FUEL TERMINALS
transmission to the refinery were substantially above the average
tariffs for the countries of the region. The fees paid by Unipetrol
Poland
to CEPRO for transmission of fuel and lease of tanks were 2-3 times
higher than the European level. Setting of the transmission tariffs
For operational purposes related to acceptance, storage, release and
based on European benchmarks will be discussed with MERO and
handling of fuels, the ORLEN Group’s logistics operations in 2012
CEPRO in 2013.
in Poland used a total of 26 facilities (14 owned fuel terminals and
12 third-party depots). At the end of 2012, the total storage capacity
Lithuania
at the disposal of PKN ORLEN (owned and contracted infrastructure)
stood at approximately 7 million m3, including the 5.3 million m3
ORLEN Lietuva owns an 87 km long section of the Samara-Ventspils
storage capacity of IKS ‘Solino’.
product pipeline, which passes through the territory of Lithuania
to Ventspils in Latvia. In 2012, around 6.3 million tonnes of diesel
In order to improve the operational efficiency, we are carrying out
oil from Russia were transported through it to Latvia.
necessary upgrades and improvements to our fuel terminals, enabling us to maximise their fuel dispatch capabilities, offset logistical
constraints, maintain the high quality products in the logistics system,
in Lithuania
and optimise costs.
Czech Republic
Ventspils Terminal
Džūkste
from Yaroslav
Mozeikai Refinery
Polotsk
Biržai
(pumping station)
Būtingė Terminal
Ilūkste
from Samara
In 2012, as in previous years, the Unipetrol Group used 12 depots
from the storage and distribution network of the national operator,
CEPRO, which are directly linked to the CEPRO pipeline, two depots
leased from third parties, as well as its own terminal in Paramo
Pardubice. The Slovak subsidiary (Unipetrol Slovakia) used one
terminal (Nowe Zamky).
Lithuania
For logistics operations, mandatory stock-keeping and customer service, ORLEN Lietuva used five terminals, including one LPG terminal.
To ensure storage capacity, in 2012 ORLEN Lietuva signed a longterm contract with Klaipėdos Nafta, ensuring storage capacity for
Litwa
Raw material pipelines
Product pipelines
Unused raw material pipelines
48
the company until 2024. In addition, there were changes to the group
of fuel terminals used: the terminal at Jonava was replaced with
the terminal in Okseta. The change in organisation is designed
to increase sales in the central region of the country without increasing
the cost of logistics.
RAIL TRANSPORT
ROAD TRANSPORT
Poland
In 2012, fuel was supplied to the Company’s stations in Poland
by ORLEN Transport. Its share in the domestic market of road fuel
Rail transport in the ORLEN Group was handled by ORLEN KolTrans
transport was 36%.
(about 30% of the transported volume) and seven other external
carriers. By train, we transported a total of about 6.6 million tonnes
In the Czech Republic, Benzina petrol stations were supplied with
of products, including 3.9 million tonnes of liquid fuels, such as gaso-
fuel by Petrotrans, a Unipetrol Group company. Its share in the Czech
lines, diesel oil, heating oil and JET A-1.
market of fuel transport by road amounted to over 17% (share
of volumes transported by Petrotrans in total transport volume,
Czech Republic
based on data from the Czech Association of Petroleum Industry
and Trade, CAPPO).
In the Unipetrol Group, rail freight is ensured by Unipetrol Doprava,
the largest tank car carrier in the Czech Republic (the third largest
In Lithuania, fuel supplies to the ORLEN Lietuva stations are made
cargo carrier). In 2012, Unipetrol Doprava transported – using its
by UAB Simeon, an external company selected in a tender held
own rolling stock – about 2.5 million tonnes of goods, including
in 2007. In 2012, the contract with UAB Simeon was renegotiated
approximately 1.4 million tonnes for the Unipetrol Group companies.
for the next two years.
Lithuania
SEA CARGO HANDLING
For logistics operations, mandatory stock-keeping and customer ser-
In Poland, we used the ports in Świnoujście, Gdynia and Gdańsk
vice, ORLEN Lietuva used five terminals, including one LPG terminal.
for sea cargo handling. The total volume of products handled
In 2012, ORLEN Lietuva signed a long-term contract with Klaipėdos
in 2012 exceeded 1.5 million tonnes. The volume of ORLEN Lietuva
Nafta, ensuring storage capacity for the company until 2024. In ad-
products handled by Klaipėda sea ports was more than 4.6 million
dition, there was a change in the organisation of the fuel terminals
tonnes in 2012.
used: the Jonava terminal was replaced by the Okseta terminal.
This change was designed to increase sales in the central region
of the country without increasing the cost of logistics.
49
SALES
WHOLESALE
be noted here that as recently as 2010 diesel oil exports were
insignificant, at a mere 23 thousand tonnes. In 2012, the most
The adverse market environment and fierce competition in the fuel
important directions of diesel oil exports were the United Kingdom
wholesale sector required our market offer to be customised.
(197 thousand tonnes) and Germany (57 thousand tonnes).
Accordingly, the structure and organisation of our wholesale business underwent a number of changes designed to further improve
Apart from engine fuels, Poland also exported large quantities
customer service quality.
of JET A-1 aviation fuel. In 2012, its exports totalled 433 thousand
tonnes, up by 11% on 2011. Sweden (140 thousand tonnes) and
In 2012, certain macroeconomic ratios deteriorated, as did the situ-
Lithuania (105 thousand tonnes) had the largest shares in the exports.
ation on the Polish fuel market. Fuel imports through traditional,
The imports of aviation fuel stood at 33.7 thousand tonnes in 2012,
official distribution channels decreased significantly. The partial takeo-
having grown fourteen-fold from the 2.4 thousand tonnes imported
ver of sales volumes by entities operating on the grey market has
in 2011. According to Eurocontrols air traffic forecasts, the Polish air
definitely contributed to the decreases in consumption and imports.
transportation market will grow at an annual rate of 4-6%, compared with an average annual rate of 1-2% for European markets.
Oversupply of products was redirected from the domestic market
to, primarily, Ukraine, the United Kingdom and Sweden. In 2012,
The European market is characterised by decreasing demand for
exports totalled 1,015 thousand tonnes, up by 61% year on year.
heavy fuel oils and the resulting oversupply. For non-maritime uses,
fuel oil is replaced by more environmentally friendly natural gas,
The share of gasolines in Polish exports stood at 67%. Exports
as well as by much cheaper hard coal and coal dust. Further, starting
of gasolines amounted to 678 thousand tonnes in 2012, having
from 2015, major drops are expected in the use of fuel oils in sea
grown by 31% on 2011. Ukraine, Sweden and the United King-
transportation, as new exhaust gas emission regulations take effect.
dom had the largest shares in exports of gasolines from Poland,
The sales volumes for fuel oil with sulphur content of up to 3.5%
with volumes of 269 thousand tonnes, 148 thousand tonnes and
will successively decrease year over year, with growing sales of fuels
134 thousand tonnes, respectively.
with sulphur content below 0.1% (as required by the IMO’s regulation, taking effect from January 1st 2015).
When compared with past years, 2012 diesel oil exports were high
at 337 thousand tonnes, up by over 200% year on year. It should
Volume of refining products sold by the ORLEN Group on its home markets in 2011-2012 (’000 tonnes)
» » » 2012
2011
Fuels
Gasolines
Diesel oils
Light fuel oil
Jet fuel
LPG
Subtotal – fuels
Poland
Czech
Republic
Lithuania
Total
Polska
Czech
Republic
Lithuania
Total
1,323
3,853
648
441
349
6,614
659
1,497
46
79
79
2,360
2,770
3,414
9
311
117
6,621
4,752
8,764
703
831
545
15,595
1,289
3,466
555
453
428
6,191
656
1,464
39
89
82
2,330
2,553
3,599
11
281
116
6,560
4,498
8,529
605
823
626
15,081
794
103
1,442
2,788
5,127
11,741
236
56
114
86
492
2,852
129
0
1,613
77
1,819
8,440
1,159
159
3,169
2,951
7,438
23,033
789
124
1,607
2,768
5,288
11,479
196
51
61
64
372
2,702
124
0
1,603
115
1,842
8,402
1,109
175
3,271
2,947
7,502
22,583
Other refining products
Bitumens
Oils
Heavy fuel oil
Other
Subtotal – other refining products
Total
source: in-house, based on Group data
50
FUELS
Structure of domestic sales of refining products
in 2011-2012
The ORLEN Group’s wholesale operations are conducted by entities
2012
involved in the sale of refining products in Poland, as well as foreign companies: Unipetrol Slovensko s.r.o., Unipetrol RPA s.r.o. and
Paramo a.s. (the Czech Republic); AB ORLEN Lietuva and the UAB
Mezeikiu naftos prekybos namai Group (Lithuania). In 2012 the Group
conducted wholesale of refining products in Poland, the Czech
Republic, Germany, Slovakia, Lithuania, Latvia, Estonia and Ukraine,
as well as (by sea) in the US, Canadian and African markets, and
6.9%
4.8%
3.9%
3.7%
1.1%
2.5%
Bitumens
Light fuel oil
JET A-1 fuel
LPG
Oils
Other refining
products
30.2%
Diesel oil
to West-European cargo-handling terminals.
In 2012, the refining segment represented 64% of the ORLEN
21.7%
Brine and salt
separated
11.2%
Gasolines
Group’s total sales, followed by the retail segment with a 21% share
and the petrochemical segment with a 15% share in total sales.
14.0%
In the fuel segment, the Group recorded sales volume of appro
Heavy fuel oil
ximately 15.1 million tonnes in 2012, down by approximately
3% (ca. 514 thousand tonnes) on 2011. The decrease in total
sales was primarily driven by lower sales of gasolines (by 5%) and
diesel oil (by 3%). The lower diesel oil sales are mainly attribut-
2011
able to the growth of the grey market, most active in the Czech
Republic and Poland.
When compared with the previous year, 2012 saw a 15% increase
in the Group’s LPG sales, driven by the growing demand for cheaper
engine fuels. Sales of oils and heavy fuel oil also increased, by 9%
and 3% respectively, year on year.
Poland
6.8%
5.5%
3.7%
3.0%
0.9%
3.1%
Bitumens
Light fuel oil
JET A-1 fuel
LPG
Oils
Other refining
products
11.3%
Gasolines
Domestic sales volume was 11,479 thousand tonnes in 2012.
32.8%
Diesel oil
20.6%
Brine and salt
separated
Diesel oil remains the most important fuel in terms of sales
volume (3,466 thousand tonnes) and share in total sales (30%).
12.3%
On the back of decreasing consumption, sales of gasolines went
Heavy fuel oil
down to 1,289 thousand tonnes and sales of light fuel oil to 555
thousand tonnes.
The structure and organisation of our wholesale business underwent
a number of changes designed to further improve customer service
quality. This was our response to the adverse market environment
and fierce competition in the fuel wholesale sector, which required
the adjustment of our market offer to the needs of the customer.
51
SALES
We have been continuously developing our IT systems to build
systems. Via a website, customers may access data on the progress
a competitive advantage. IT projects implemented in 2012 include:
of work under signed contracts, as well as safely manage contracts
and orders. The application supports access to information on promo-
Self-Service
tions, as well as to reports available to customers. The widespread
We were the first entity on the liquid fuel market to implement a full
use of the tool is best confirmed by the fact that, as at the end
self-service system for customers using our fuel terminals. The sys-
of 2012, over 90% of all sales orders incoming to the system were
tem enables prepared loading schedules to be fed into it, allowing
generated at the e-Wholesale site, while the number of contracts
customers to schedule fuel collections directly within the terminal
signed with system users increased by 9% year on year. In March
systems. With the implementation of this centralised solution and
2012 the platform was also implemented at ORLEN Asfalt.
identification of scheduled operations using magnetic cards, total
driver service time has been reduced from 90 to even 40 minutes,
Contact-center
while the authorisation processes for drivers and vehicles to collect
With a view to improving our customer relations, PKN ORLEN has
fuels has become simpler and more convenient. Currently, the Self-
launched a contact-center system, whose major advantages include:
Service system is in place at all of the Group’s own wholesale fuel
» support of easy access to crucial information for both our cus-
depots; since 2012, the system has also been operating at OLPP’s
tomers and our employees,
depots. In 2012, the total number of contracts signed with users
» opportunities to increase profits through more efficient service
of the system increased by 51%, and the number of cards issued
of existing customers and reaching new customers with offers
by 21%.
(promotional campaigns, information on services etc),
e-Invoice
The electronic invoice system has significantly reduced paper docu-
» integration of the contact-center with business systems,
» reduced call waiting time and development of a uniform pattern
of dialogue between customers and their assistants.
ment use. The implementation of an e-invoice system has contributed
to the increased efficiency and security of document circulation:
All tools supporting customer service will also be gradually imple-
the invoicing process now takes much less time and documents
mented at ORLEN Group companies. The contact-center target
may be kept in a convenient way, enabling unlimited, safe and
implementation provides for the entire e-Wholesale service of our
quick access to invoices from any place, at any time. In 2012,
SME customers to be taken over by ORLEN Paliwa, a company
the number of system users increased by 14.6%. Currently, nearly
established in the last weeks of 2012.
80% of all of our wholesale customers use the system. In addition
to cost savings and support of convenient settlements, e-invoices
Petrolot
also help to promote pro-environmental attitudes.
In the last days of 2012, PKN ORLEN took over 100% of shares
e-Wholesale
in Petrolot, in support of the development of a comprehensive
The e-Wholesale platform is a tool supporting remote communication
growth strategy for the sales of aviation fuels and airport services
with customers and is fully integrated with the Self-Service system. It
on the Group’s home markets.
provides safe access for users to information stored in PKN ORLEN’s
52
Fuel imports
imported from Germany (461 thousand tonnes) and Slovakia (229
thousand tonnes). The aggregate volume of imports from those two
In addition to domestic production, demand for fuels was also
countries represented over 80% of total diesel oil imports to Poland.
satisfied with imports. In 2012, fuel imports came mainly from
As already mentioned, such large decreases are partially attribut-
refineries located in neighbouring countries, in particular including
able to lower domestic demand and much lower exports, as well
Germany, Slovakia and Lithuania. Unlike in previous years, imports
as a partial takeover of imports by the grey market.
from Scandinavia through ports on the Gdańsk Bay were insignificant.
A material decrease was also recorded in imports of gasolines.
The total volume of fuel imports to Poland decreased by 47%
In 2012, 437 thousand tonnes of gasolines were imported, down
in 2012, to 1,303 thousand tonnes, with diesel oil representing
18% year on year. As in the case of diesel oil, Germany and Slovakia
66% and gasoline 34% of the total imports volume.
had the largest shares in gasoline imports (247 thousand tonnes
and 168 thousand tonnes, respectively). The aggregate volume
In 2012, 862 thousand tonnes of diesel oil were imported to Poland,
of imports from those two countries represented 95% of total
as much as 55% less than in 2011. The largest volumes were
gasoline imports to Poland.
Fuel imports volume in 2011-2012 (’000 tonnes)*
2011
» » » 2012
CHANGE
Gasoline
530
437
-18%
Diesel oil
1,906
862
-55%
6
4
-30%
2,442
1,303
-47%
DIESEL OIL
GASOLINES
LIGHT FUEL OIL
Light fuel oil
Total
* source: The Energy Market Agency’s estimates
Sources of fuel imports to Poland in 2012*
Germany
53.5%
56.6%
100%
Slovakia
26.6%
38.4%
—
Lithuania
13.3%
—
—
4.1%
—
—
UK
Latvia
2.2%
—
—
Hungary
0.2%
3.9%
—
Belarus
0.1%
—
—
—
1.1%
—
100%
100%
100%
Czech Republic
Total
* source: The Energy Market Agency’s estimates
53
SALES
Czech Republic
In 2012, the Czech fuel market was to a large extent adversely affected
Structure of sales of refining products
on the Czech market in 2011-2012
by the overall market environment. The competition in the sector
2012
increased on the back of untaxed imports of fuel from Germany,
Slovenia and Austria. According to estimates, grey market fuel
imported to the Czech Republic accounted for some 20%-25%
of the total volume of Czech foreign purchases. The unfavourable
market conditions were additionally exacerbated by price wars
in the retail segment, which contributed to a substantial decline
in margins and sales volumes. These factors reinforced the downward trend which had been prevailing on the gasoline market for
several years, reducing consumption by some 6%. Only diesel oil
3.3%
3.0%
2.3%
1.9%
1.4%
2.4%
JET A-1 fuel
LPG
Heavy fuel oil
Oils
Light fuel oil
54.2%
Diesel oil
7.2%
Bitumens
consumption increased slightly on 2011.
24.3%
Gasolines
Given the challenging market conditions, maintaining the gasoline
sales volume close to 2011 levels (at 656 thousand tonnes) should be
considered a success. The slight decrease in diesel oil sales, to 1,464
thousand tonnes, was caused by the shutdown of the Paramo
refinery in Q2 2012 and transformation of the Pardubice unit into
a warehouse terminal. The share of diesel oil in Unipetrol Group’s
sales structure exceeded 54%.
In 2012, we enhanced cooperation with key fuel companies,
independent wholesalers and retail networks. Unipetrol executed
exclusive supply contracts with all hypermarket chains operating
on the Czech market. Furthermore, the company expanded its
exports to neighbouring countries, in particular to Slovakia. In Q4
2011
2.8%
2.8%
4.0%
1.9%
1.6%
3.0%
52.5%
2012, the Litvinov refinery started supplying fuels to ORLEN service
stations in Germany. In addition, warehouses in Domazlice, Horovice
and Pardubice (the Czech Republic), and a terminal in Nove Zamky
(Slovakia) were added to the distribution network.
54
JET A-1 fuel
LPG
Heavy fuel oil
Oils
Light fuel oil
Diesel oil
8.3%
Bitumens
23.1%
Gasolines
Lithuania
In 2012, the ORLEN Lietuva Group fully met its fuel sales targets
Sales structure of ORLEN Lietuva Group’s refining products
in 2011-2012
by achieving a total sales volume of 8,402 thousand tonnes, flat
2012
on 2011, as well as the best financial result since the management
takeover. Following a 35-day maintenance shutdown in Q2 2012,
the Mažeikiai refinery improved its crude oil processing capacities
and fuels yield. Another success was the Company’s increased market share in the main product categories on key markets, especially
3.3%
1.5%
1.4%
0.1%
1.4%
JET A-1 fuel
Bitumens
LPG
Light fuel oil
in Lithuania and Latvia, where the Company’s share in gasolines
42.8%
and diesel oil markets stood at 96% (up 7pp) and 69% (up 6pp),
19.1%
respectively.
Heavy fuel oil
Diesel oil
30.4%
On inland markets, ORLEN Lietuva consolidated its position as the larg-
Gasolines
est and most reputable supplier of top quality fuel products by maintaining a substantial market share. In 2012, the downward trend
in gasoline consumption continued. Lower gasoline sales were
offset by a 5% increase in diesel oil sales (3,599 thousand tonnes).
The share of diesel oil in ORLEN Lietuva’s sales structure increased
by more than 2pp, to nearly 43%, chiefly at the expense of gasolines,
whose share in total sales went down to 30%.
2011
In Ukraine, our gasoline and diesel oil sales volumes exceeded
expectations. We also began to distribute test volumes of JET
A-1 aviation fuel manufactured in Mažeikiai. At the same time,
some of our Ukrainian customers purchased products directly from
the Płock refinery. The total volume of fuels from Płock and Mažeikiai
3.7%
1.5%
1.4%
0.1%
0.9%
JET A-1 fuel
Bitumens
LPG
Light fuel oil
on the Ukrainian market was nearly 1 million tonnes in 2012.
19.1%
As in the previous years, maritime sales included US 92 gasoline,
diesel oil and 3.5% heavy fuel oil, exported to the US, Canada,
Africa and to West-European cargo-handling terminals.
40.5%
Diesel oil
Heavy fuel oil
32.8%
Gasolines
In late 2012, we entered into favourable (inland and maritime)
forward contracts for 2013, which guarantee stable sales of at least
70% of the refinery’s products and provide a sound footing for
good financial performance.
55
SALES
OTHER REFINING PRODUCTS
RETAIL
In 2012, the total wholesale of other refining products at the ORLEN
We operate a network of nearly 2,700 premium and economy seg-
Group increased by approximately 1%, to 7.5 million tonnes. The larg-
ment service stations in Poland, Germany, the Czech Republic, and
est increases were recorded in the oils segment, where sales grew by
Lithuania. In 2012, we worked out new initial directions of strategic
over 9%, as well as the heavy fuel oil segment – up 3% on 2011.
development for the retail segment, which will be further revised
in 2013.
Poland
The volume of refining products sold on the domestic wholesale
Retail consumption of fuels in Poland, the Czech Republic, and
market rose by over 3% year on year, to 5,288 thousand tonnes.
Germany was lower in 2012 compared to 2011. A slight improve-
The highest growth was recorded in oils and heavy fuel oil, which
ment was only recorded in Lithuania, where the market had stabilised
were up 20% and 11%, respectively. In 2012, the majority of other
in recent years. The reasons for these changes included economic
refining products was sold to other Group companies (ORLEN Asfalt
slowdown, higher fuel prices and grey market expansion. The latter
and ORLEN Oil). The only exception was heavy fuel oil, which in 2012
has been especially harmful, as it disturbs the balance between
was acquired by companies operating on EU markets (Denmark
the wholesale and retail markets, negatively affecting the perfor-
and the Netherlands).
mance of service station network operators.
Czech Republic
Sales volume in the retail segment in 2012 improved by 2% year
Fuel oils with low sulphur content were sold mainly to the power
on year and amounted to 9.1 billion litres. This good result was
units of the Kralupy nad Vltavou plant and its sister company Paramo
primarily attributable to higher sales of diesel oil, which improved
Pardubice. Following renegotiation of the terms of executed con-
by over 2%, and by the sales growth on the German market, which
tracts, in 2012 we reduced supplies of the product to third-party
was better than in 2011.
customers from the power sector and entered into more favourable
transactions on the market. Surplus high-sulphur fuel oil generated
2012 was a year of continued industry consolidation, manifest
seasonally at the Litvinov refinery was exported as bunker fuel. Other
in further growth of franchise networks and increased interest
refining products were sold chiefly to the Unipetrol Group, with any
of independent service stations in closer cooperation with large
surplus distributed to other entities operating in the Czech Republic.
nationwide networks. Customers are increasingly less likely to use
unknown service stations, and look for stations with well-known
Lithuania
and recognisable brands.
In Lithuania, the wholesale of other refining products increased by over
56
1% in 2012, to 1,842 thousand tonnes. Heavy fuel oil continued
Sales of non-fuel and food products are becoming increasingly im-
to be the most important product in this group, accounting for ca.
portant for service station networks. Faced with significantly lower
87% of other refining products sold. In 2012, heavy fuel oil was
margins on fuels and lower sales of fuels, they are able to generate
acquired chiefly by international companies, which collected the oil
profits from margins on non-fuel and food products and services.
at the Klaipėda port and distributed it in Western Europe and Asia.
Networks of service stations have focused on offering new food
Another major group of customers were Lithuanian power companies.
services in a majority of locations.
In addition, ORLEN Lietuva strengthened its position as a supplier
Lower retail margins and limited ability to differentiate prices between
of bitumens (including modified bitumens) in the Baltic states
service station segments have strengthened their efforts to win
by taking advantage of the production capacities of refineries
customers. Self-service stations have become much less competitive
in Mažeikiai and Płock.
as they are unable to further reduce prices, and without the non-fuel
services it is more difficult for them to generate acceptable financial
Poland
results. The difference between premium and economy service stations is also becoming less visible as they are converging in terms
Despite efforts by competing companies and lower fuel consump-
of both fuel prices and their non-fuel offer. More and more frequently,
tion, at 5.7 billion litres the volume of fuels sold by the Company
economy service stations are offering basic catering facilities.
in 2012 was similar to that recorded in 2011.
Numerous service station networks in individual countries have
In 2012, we operated a network of 1,767 service stations in Poland,
launched or are continuing their collaboration with retail networks,
11 of which were newly launched (including two new motorway
which consists in organising joint promotional campaigns to attract
service areas on the A2 motorway). In the coming years, the Company
customers to retail outlets and service stations with the use of vari-
intends to focus on intensive development of its premium segment
ous discounts.
service stations. We still intend to retain our leadership of the motorway stations segment (we participate in the majority of tender
On some markets, mainly Czech and Lithuanian, less expensive fuels
procedures for stations to be located on newly built motorways and
and lack of interest in non-fuel services and products at service sta-
expressways). Modernisation of service stations and their adaptation
tions might prompt the development of self-service stations. Some
to changing customer expectations form an important part of our
international companies are currently testing such solutions, but
strategy. In 2012, over 40 service stations were upgraded, while
no strategic decisions to launch a larger number of stations of this
the entire modernisation effort is scheduled for completion in 2013.
type have been made.
The Company continues to improve its business efficiency and fully
The market share of smaller, less recognisable and financially weaker
optimise the costs of running its service stations.
independent stations may further decrease due to changing customer expectations of service stations’ offers and standards, as well
We are also carrying out projects aimed at optimising our franchise
as the need for new investments to adjust the stations to new mar-
network. Its continued development and efficiency improvement,
ket trends or ensure their compliance with technical requirements.
as well as efforts to unify the CODO and DOFO networks are among
the strategic premises for the retail segment.
In 2012, the ORLEN Group carried out retail sales in Poland, the Czech
Republic, Lithuania, and Germany. The companies responsible for
Loyalty programmes and effective sales management have helped us
retail business in these markets were, respectively, PKN ORLEN,
achieve a 34% share of the Polish retail fuel market. Other market
Benzina, Ventus Nafta and ORLEN Deutschland.
heavyweights include international companies, such as BP, Shell and
Statoil, as well as the Polish Grupa Lotos.
In total, we operate a network of nearly 2,700 premium and economy
segment service stations on these markets. In 2012, we worked out
The significant improvement in service station effectiveness is a very
new initial directions of strategic development for the retail segment,
positive signal – in 2012, the average annual sales at the Company’s
which will be further revised in 2013.
own service stations exceeded 3.7 million litres and were ca. 2%
higher than in 2011. Introducing motorway payments with our fleet
The reorganisation of retail sales streamlined the functioning of the in-
card and enhancing the functionality of the fleet website were key
dividual areas of the retail segment. The new structure and a group-
to reaching new business customer groups.
wide change in approach to segment management make it possible
to fully utilise our competence and experience, support the pursuit
Our representatives worked with dedicated teams at the National
of strategic objectives, and coherently develop the network of service
Bank of Poland to lower the interchange fee for credit card payments,
stations in individual countries.
and also supported the Foundation for the Development of Noncash Transactions (Fundacja Rozwoju Obrotu Bezgotówkowego).
In parallel, we also carried out marketing campaigns promoting
cash transactions.
57
SALES
In 2012, revenue from sale of non-fuel products and services improved
by 2%. On average, non-fuel sales grew by 4% per PKN ORLEN
service station, while the sales of other service station networks
PKN ORLEN – fuel sales structure in Poland
in 2011-2012
operated by the largest fuel companies on the Polish market and
2012
associated in the Polish Organisation of Oil Industry and Trade
(POPiHN) fell by approximately 3%. To meet new market trends
and changing customer preferences, we have begun drafting future
development directions and assumptions for our non-fuel operations.
The main goal of this project is to balance future revenue sources
9.8%
LPG
in the retail segment.
29.7%
In 2012, most of our service stations (1,077) were operating in the pre-
60.5%
Diesel oil
Gasolines
mium segment under the ORLEN brand. 489 stations were operating
in the economy sector under the BLISKA brand. 201 service stations
(as at the end of 2012), operating under the simplified model, are
either being adapted to one of the above standards or decommissioned. Franchise stations account for ca. 25% of our network.
In 2012, our range of food services was further expanded and
introduced to the franchise service stations. The number of Stop
Cafe and Stop Cafe Bistro food outlets at the end of 2012 was
2011
respectively 546 and 267, up by 115 and 45. We also introduced
basic catering facilities at nearly 150 BLISKA service stations.
9.4%
LPG
30.1%
Gasolines
58
60.5%
Diesel oil
Germany
Germany has one of the largest and most mature retail fuel sales
ORLEN Deutschland – fuel sales structure in Germany
in 2011-2012
markets in Europe. In 2012, ORLEN Deutschland saw the volume
2012
of fuels sold improve up to 2.8 billion litres despite the general
downtrend on the German market. The improvement was primarily
due to an 11% increase in diesel oil sales at the STAR service stations.
The STAR network also recorded a significant (11%) improvement
1.5%
in non-fuel sales.
LPG
Our sales also significantly benefited from the very good performance
46.0%
of the service stations acquired from OMV in 2010 and included
52.5%
Gasolines
Diesel oil
in our network in 2011. As at the end of 2012, ORLEN Deutschland
operated 559 service stations (538 in the economy segment under
the STAR brand, 20 service stations at supermarkets, and one ORLEN
brand station in Hamburg). With a 6% share, our STAR brand holds
second place in the economy segment of the German market.
2011
1.4%
LPG
43.8%
54.8%
Gasolines
Diesel oil
59
SALES
Czech Republic
With an almost 14% share, we are a leader of the Czech retail
fuel market. As at the end of 2012, we operated a network of 338
premium and economy service stations. The number of Benzina Plus
Benzina – fuel sales structure in the Czech Republic
in 2011-2012
2012
service stations, meeting the highest standards of the premium segment and offering a broad range of non-fuel services and products,
increased from 115 to 117. In the economy segment, the number
of stations increased to 223 from 221 in 2011.
2012 was another year of falling fuel consumption on the Czech
36.8%
Gasolines
63.2%
Diesel oil
market, primarily on the back of plummeting gasoline sales. High
fuel prices and shrinking public sector salaries had an adverse effect on fuel consumption. Sales were also significantly undermined
by the grey market. In effect, annual retail sales volume in 2012 fell
by 4.8% year on year, and exceeded 0.5 billion litres.
We addressed the impact of these unfavourable external factors
by expanding our non-fuel offer, in particular the food services.
We successfully marketed the Stop Cafe and Stop Cafe Bistro
brands, which are now present at the 92 most promising service
stations. Changes to the food services model resulted in a nearly
2011
11% improvement in revenue from these services.
37.9%
Gasolines
60
62.1%
Diesel oil
Lithuania
AB Ventus Nafta, an ORLEN Group company, operates 35 service
AB Ventus Nafta – fuel sales structure in Lithuania
in 2011-2012
stations in Lithuania. The main competitors in Lithuania are Lukoil,
2012
Statoil, and Neste.
The volume of retail fuel sales of AB Ventus Nafta in 2012 was
similar to that recorded in the previous year, and remained at nearly
4% of the total retail sales on the market. VERVA diesel oil’s popu-
21.8%
Gasolines
larity improved – its sales rose by 15% year on year. Consistent
51.5%
implementation of the non-fuel business strategy boosted the sales
of non-fuel products by 3%.
Diesel oil
26.7%
LPG
2011
23.3%
Gasolines
51.1%
Diesel oil
25.6%
LPG
61
05
Wellbore structure
To reach gas-bearing shales located
several kilometres below ground
it is necessary to drill wells. Drilling
alone does not guarantee successful
production, which is dependent
on the results of exploration. Wells can
be drilled in two directions: vertically
and directionally (horizontally).
To ensure the security of underground
aquifers, each well is equipped with
several casing strings and additionally
strengthened and sealed with cement.
Ensuring that a well is sealed tight
is a technological condition for the later
stages of hydrocarbon production
and guarantees the security
of the drilling site, hence the proper
assembly of the structure is verified
at several stages by performing pressure
tests for leakage.
POWER
G E N E R AT I O N
Casing strings:
• Production casing
• Intermediate casing
• Conductor casing
• Surface casing
Wellbore
Cement layers
Impermeable rock
Aquifer
POWER GENERATION
Investment in power generation is one element
of PKN ORLEN’s strategy of expanding our value
chain by adding natural gas and electricity.
Being able to use our locations to generate
electricity in cogeneration facilities gives
the power segment promising growth prospects.
Investment in power generation is one element of PKN ORLEN’s
multi-utility strategy of expanding our value chain by adding natural
gas and electricity. The effectiveness of the strategy is proved by
the fact that companies with a similar multi-utility approach operate
in the original EU member states.
We decided to pursue our growth objectives by constructing a gasfired CHP plant, as the advantages of the technology include lower
In Poland, electricity consumption per capita is 40% below the EU
construction costs and a shorter investment cycle. Compared with
average. It is expected that domestic electricity consumption will
traditional coal-fired technology, the construction cost of gas-fired
grow by approximately 2% per annum until 2030. A large propor-
units is as much as 40% lower, amounting to approximately EUR
tion of generation assets (contributing 44% of the electricity now
0.65 million per MW of installed capacity for a condensing unit.
generated in Poland) have been in operation for more than 30
Moreover, the investment cycle is much shorter – a 450 MWe unit
years. Hence, the ORLEN Group intends to capture the opportunity
may be completed in three years. Construction of a comparable
presented by the expected restructuring of the energy sector to fill
coal-fired unit would require five to six years.
the gap between demand and supply and benefit from growing
electricity prices following the restructuring. Further, PKN ORLEN will
Our key project in the power segment is the construction of a CCGT
be able to allocate a significant proportion of generated electricity
unit in Włocławek, with a capacity of approximately 470 MWe.
and heat for its own purposes, and the Company’s high efficiency
The launch of the unit is scheduled for December 2015. The CHP
gas-fired cogeneration capabilities should give it a competitive edge
plant in Włocławek will be directly engaged in ANWIL’s technological
and ensure cost effectiveness.
processes, supplying electricity and process steam to the company.
Following the project’s completion, a new, high-efficiency CHP plant
Today, the ORLEN Group is a major producer of heat and electricity.
will replace the existing lower-efficiency unit, which will then operate
However, its output is chiefly consumed by its own production plants.
only as a stand-by unit. The new facility will significantly improve
The Company’s CHP plant in Płock is the largest in-house CHP plant
the security of ANWIL’s power and steam supply. Because generation
in Poland. Its heat and electricity generating capacity is 2,150 MWt
of electricity and process steam are associated processes, the new
and 345 MWe, respectively. The heat generated satisfies the needs
unit will produce electricity in high-efficiency cogeneration, which
of the Main Plant and is supplied to external customers. The Plant
has a highly positive effect both on the projects assumed economic
operates at a high efficiency of approximately 86%.
result and on its environmental impact. The contract for the construction of the CHP plant by a consortium of General Electric and
The CHP plant at Unipetrol’s facility is one of the largest in the Czech
SNC Lavalin, as well as a long-term maintenance agreement with
Republic, generating 1,000 MWt and 110 MWe of heat and elec-
GE, were executed on December 4th 2012.
tricity respectively.
The CHP plant in Mažeikiai (1,400 MWt and 160 MWe of heat and
electricity generating capacity, respectively) supplies heat to ORLEN
Lietuva. The plant is fired by heavy fuel oil and refinery gas.
64
P K N OR LE N A N N U A L R E P OR T 20 1 2
The ORLEN Group’s strategic objectives in the power segment include:
» increasing electricity generation capacity by constructing a gasfired CHP plant in Włocławek,
» upgrading the existing infrastructure to further develop the electricity generation capacity and to bring the existing assets in line
with the requirements of the Industrial Emissions Directive,
» ensuring the energy security of the ORLEN Group.
To achieve these objectives, PKN ORLEN intends to:
» engage in new power sector projects by constructing new power
units at its own sites,
» implement an investment programme to adjust its existing assets
to meet the requirements of new environmental standards,
» improve the efficiency of existing assets by implementing
an investment programme at the power plant in Płock.
65
06
Drilling rig setup
A drilling rig is a machine used to drill
a wellbore in the ground with a drill
bit mounted on a drillstring advancing
downwards. A rig is set up after
the drilling site is properly prepared
by laying protective liner and concrete
slabs. Drilling rigs operate on a 24/7 basis,
for six to eight weeks.
Monitoring
Drilling operations are monitored
and controlled on an on-going basis
by both the operator and competent
institutions (for example, the Regional
Mining Authority). Exploration
and production operations are also
subject to detailed regulations.
For example, noise during the day
and at night does not exceed 55
and 45 decibels, respectively, which
is in compliance with the Regulation
of the Minister of Environment
on permissible levels of noise.
PRODUCTION
(UPSTREAM)
Drill head
P R O D U C T I O N (U P S T R E A M)
Poland may be among the ten countries with
the largest shale gas potential. We are part
of the Polish shale gas segment, and if this
historic opportunity for our country’s leap
in growth is not wasted, we stand to become
one of its main beneficiaries.
and Production Poland, the ORLEN Group has come to hold ten
exploration licences covering more than 9,000 km2 within the following production areas:
» Lublin Shale (seven licences),
» Hrubieszów Shale (one licence),
» Mid-Poland Unconventionals (two licences).
In 2012, the ORLEN upstream segment focused on continued pros-
In line with the Updated ORLEN Group Strategy, we plan to intensify
pecting for gas from unconventional sources within our licence areas.
our exploration and production efforts in order to secure access
We successfully completed work on four new exploration wells,
to our own resources of crude oil and natural gas, particularly
including the first two horizontal wells drilled within the Lublin basin.
from unconventional sources. Over the next five years (2013-2017),
We also filed an application requesting approval for the assignment
we intend to invest up to PLN 5.1bn in the exploration and produc-
by ExxonMobil of the Wodynie-Łuków and Wołomin licences, located
tion of those hydrocarbons. Out of the basic pool of PLN 2.4bn,
in the region of Mazovia. We consistently developed our team
we expect to finance the drilling of up to 57 wells – depending
of experts, prepared for the end-to-end execution of projects, from
on the results of our exploration work. This shale gas exploration
planning and specification of technical requirements, to economic
project assumes the drilling of up to 42 wells by 2017 from that
analysis, down to operating activities
pool of funds. The total production volume for PKN ORLEN’s entire
portfolio of production projects in 2017 is forecast at around 2 million
We were also involved in work on conventional production projects.
barrels of oil equivalent (boe), including 1 million boe (160 million
ORLEN International Exploration and Production Company BV,
cubic metres) of gas and roughly 1 million bbl of oil.
a company of PKN ORLEN, together with Kuwait Energy Company
Netherlands Cooperatief UA – through their company Balin SIA –
We are considering investing an additional PLN 2.7bn in the upstream
continued to explore for crude oil on the Baltic Sea. Additionally,
business. Depending on the results of our work, the funds would be
together with Polskie Górnictwo Naftowe i Gazownictwo (PGNiG)
applied toward further exploration and appraisal of resources, and
we were engaged in work in the vicinity of Sieraków, and – on our
on the acquisition of more licences in Poland or interests in develop-
own – in the Lublin region. We hold interests in nine licences
ment and production projects outside of Poland.
to prospect for conventional hydrocarbons. Over the year, analyses
were also performed into the rationale behind possible acquisition
All these efforts are consistently geared towards building a stable
of fields located abroad or acquisition of interests and cooperation
and diversified portfolio of upstream projects at PKN ORLEN. With
with experienced partners. the assumed rate of investment into the upstream area, we should
launch production and deliver operating profit by 2017.
Key projects designed to support the development of the upstream
business in 2012 included:
Our Group is a leader of unconventional gas exploration in Poland.
» successive stages of exploration projects in the Lublin and Mazovia
Following a decision by the Ministry of Environment of Febru-
regions, including four wells (two horizontal and two vertical)
ary 2013 approving the assignment of two licences (Wodynie-
drilled in search of shale gas,
Łuków and Wołomin) previously held by ExxonMobil Exploration
68
» continued pursuit of the exploration project within the Latvian
economic zone of the Baltic Sea (including interpretation of 3D
UNCONVENTIONAL
HYDROCARBON PROJECTS
seismic and investigation of the sea floor to prepare for the placement of a semi-submersible drilling platform – the first to operate
on the Baltic Sea, and the drilling of the first exploration well,
LUBLIN
SHALE
scheduled for 2013),
» implementation of the first stage of the Sieraków project,
Lublin Shale is our most advanced project to confirm the presence
encompassing initial appraisal and preparation to drill another
of unconventional gas resources. Work under the project is being
well,
carried out on the basis of five licences (Bełżyce, Garwolin, Lubartów,
» preliminary analysis of the available data archive and development
Lublin, Wierzbica) by ORLEN Upstream, a PKN ORLEN company formed
of project assumptions for the Hrubieszów, Łódź and Sieradz
to implement our strategy for hydrocarbon exploration, appraisal
licence blocks,
and production. Following a decision by the Ministry of Environment
» conduct of studies and analyses of several dozen potential projects/
approving the assignment of two licence blocks previously held by
exploration and production assets, both in Poland and abroad,
ExxonMobil Exploration and Production Poland, the Lublin Shale
» full analysis of several selected projects with a view to acquiring
project was extended to include two new licences – Wodynie-Łuków
exploration and production assets.
and Wołomin, located in the Mazovia Region.
Six projects are now in progress and will be pursued in the coming
In the first stage of exploration under the Lublin Shale project,
years. Three focus on the exploration for and appraisal of unconven-
we acquired 2D seismic data (two-dimensional seismic modelling).
tional hydrocarbon plays (the Lublin Shale, Hrubieszów Shale and
The newly acquired data was first processed and then interpreted
Mid-Poland Unconventionals projects). The other three are aimed
in combination with old datasets. In 2011, we developed two
to develop conventional oil and gas fields (the Karbon, Kambr and
geological and engineering designs for the Wierzbica and Lubartów
Sieraków projects).
locations, followed by drilling and logging of the Syczyn-OU1 well.
Based on the rock core sample and other analyses, we made a decision to proceed with the exploration work. In 2012, we finished
drilling work on the Berejów-OU1 well and undertook horizontal
drilling in two locations (Syczyn and Berejów). Concurrently, we drilled
the first vertical exploration and appraisal well in the region of Mazovia (Garwolin licence area). The rock core samples recovered from
the well are now being examined, and the results will inform our
decision as to whether we should carry on with the project.
In 2013, under the Lublin Shale project, we plan to drill at least
three vertical wells and perform two hydraulic fracture treatments
including production tests on directional wells, which will be carried
out within the Wierzbica and Lubartów licence areas.
We place a strong focus on stakeholder relations. In each case,
drilling work is preceded by numerous meetings with local residents
as well as local authorities at all levels. Such meetings are accompanied by seminars devoted to the exploration for and appraisal
of unconventional gas. ORLEN Upstream engages in the lives of local communities by initiating educational projects, supporting local
sports clubs and promoting pro-environmental action.
69
P R O D U C T I O N (U P S T R E A M)
Drilling work is conducted under full technical supervision to ensure
were under way to acquire in 2013 new 2D seismic over the licence
that all operations are performed properly, in compliance with all
blocks specified above. After the data is acquired, the new and old
legally required procedures and in accordance with best operating
geological datasets will be integrated, the area will be assessed
practice. Moreover, before any drilling project is begun, the surround-
and a recommendation will be formulated regarding the applica-
ing environment and infrastructure is examined and then – upon
tion to the Ministry of Environment for grant of appraisal licences.
project completion – the same parameters are re-measured. To date,
these measurements have not shown our operations to have any
impact on the environment.
HRUBIESZÓW
SHALE
CONVENTIONAL
HYDROCARBON PROJECTS
THE KARBON
PROJECT
In March 2011, the Department of Geology and Geological Licences
of the Ministry of the Environment awarded another five-year gas ex-
In 2012, the Karbon Project in the Province of Lublin went into
ploration and appraisal licence in the Lublin region to ORLEN Upstream.
the next phase of exploration: the phase of drilling designed to confirm
The licence, located within the south-eastern part of the Lublin Coal
the presence of hydrocarbon accumulations and estimate potential
Basin, in the counties of Chełm and Hrubieszów, covered an area
reserves of crude oil and natural gas in conventional hydrocarbon
of 414.5 km2. Under the Hrubieszów Shale project in 2012 we com-
deposits in the Lublin Basin. Last year, we examined the most
pleted the acquisition of vintage 2D seismic and well log data. The data
prospective locations for drilling within the Lublin and Garwolin
was reviewed and analysed, where necessary. We also continued
licence blocks. The initial location for the first exploratory well was
to build the geological database for the Hrubieszów licence block.
also determined. For mid-2013, ORLEN Upstream has scheduled
At the same time, preparations were under way to acquire new 2D
the drilling of an exploratory well and acquisition of new 2D seismic
seismic reflection profiles. In the future, the third stage of work will
data within the Bełżyce licence area, with subsequent data pro-
involve the designing and drilling of appraisal wells. Plans for 2013
cessing and interpretation. The best prospects are associated with
include the acquisition and interpretation of new seismic datasets.
the Carboniferous sand and mud formations, as well as Devonian
carbonate formations, lying at a depth between approximately 1.2 km
MID-POLAND
UNCONVENTIONALS
and over 4 km and containing the most substantial conventional
July 2011 saw the conclusion of the licensing round for two new
THE KAMBR PROJECT
IN THE BALTIC SEA
areas: Łódź and Sieradz. The exploration licences awarded to ORLEN
deposits discovered to date in the region.
Upstream covered a total area of 1,683.5 km2 and were located
in the south-western part of the Łódź Province. The main geological
The Kambr Project, located on the Latvian continental shelf in the Bal-
objectives are to evaluate the hydrocarbon potential of unconventional
tic Sea, is being executed by Balin Energy SIA. Interests in the licence
tight gas and shale gas plays in the area. The three-year exploration
are held by PKN ORLEN (ORLEN International Exploration and Pro-
programme comprises two stages.
duction Company BV) and Kuwait Energy Company Netherlands
Cooperatief UA. In the past, work performed under the project
70
In 2012, under the Mid-Poland Unconventionals project, work
included chiefly reinterpretation and integration of archival geologi-
on the Sieradz and Łódź licences involved the acquisition and analysis
cal data and results of new 3D seismic surveys covering an area
of geological data archives. The acquisition of a full set of histori-
of over 300 square kilometres. The data acquired during the surveys
cal 2D seismic profiles was completed. We also prepared the first
enabled a more detailed imaging of the structure and tectonics
geological data pack for reprocessing, while expanding the database
of the preliminarily identified prospects (possible accumulations
containing information on that area. At the same time, preparations
of crude oil and natural gas). In 2012, our work focused on identifying
a well drilling location and drilling preparation. Geotechnical sur-
The Company also engages in international initiatives aimed
veys of the sea bed were performed and the selection procedure
at exchanging expertise in exploration for and production of uncon-
for a drilling services provider was completed. The work has been
ventional gas. In cooperation with the Energy&Geoscience Institute
scheduled to commence in Q2 2013. Drilling will be supported by
(EGI), ORLEN Upstream organises cyclical ShaleScience Conferences.
the semi-submersible drilling platform Ocean Nomad.
The first edition, entitled ‘Evolution of Views on Shale Rock’, was
held in 2011. Participants endeavoured to identify the most impor-
THE SIERAKÓW
PROJECT
tant factors shaping views on the properties of shale. The objective
of the subsequent ShaleScience conference – ‘Evolution of Views
on the Reservoir Quality and Completion Quality in Compact Shale
The key objective of the project, implemented in cooperation with
Rock’ – was to create a proper image of the two key factors upon
PGNiG S.A. within the area of the Wronki Licence in the Polish Low-
which the profitability of production from shale depends, namely
lands, is to appraise the main dolomite structure in order to confirm
reservoir quality and completion quality.
the presence of commercial resources in the field, with a view to its
subsequent development by connecting the wells to the existing
installation within the Lubiatów-Międzychód-Grotów (LMG) crude
oil and natural gas production facility.
The drilling work on the Wronki Licence commenced in 2011. Based
on the data acquired, the static geological model and dynamic
simulation model of the field were updated. Subsequently, further
locations for appraisal wells were identified.
In 2012, under the Sieraków Project, preparatory work was performed to drill the joint appraisal well Sieraków-3. If the wells being
drilled now and in the future confirm the presence of commercial
hydrocarbons, the project will enter its development phase, during
which production wells will be drilled and transmission infrastructure
will be constructed in the coming years.
The key to our operational success is innovativeness, optimisation
and advanced technologies. These values also underlie our approach
to exploration for and production of unconventional hydrocarbons.
In November 2012, ORLEN Upstream, other companies, higher education institutions and research institutions established a consortium
whose task is to promote state-of-the-art solutions for the Polish
exploration and production industry. The Blue Gas – Polish Shale
Gas Programme is a joint project of the National Centre for Research
and Development and the Industrial Development Agency, designed
to support leading R&D projects in shale gas exploration and production. The objective of the programme is to commercialise innovative
technological solutions in shale gas exploration and production.
71
07
Gigantic crane
A drilling rig or platform (for example,
an offshore rig) is a several-dozenmetres-high crane, equipped with
electrical generators, pumps,
a mud system and other structural
components. Once the well has been
drilled, the drilling rig is disassembled
and transported to the next location.
A drilling rig’s assembly/disassembly
time is 10-14 days.
Environmental
protection
In line with the waste management plan,
solid mining waste (drill cuttings) produced
during drilling is removed and utilised
on an on-going basis. Used mining liquids
are usually reused in subsequent drilling
and ordinary waste is treated. A waste
management plan is prepared and approved
for each drilling location.
THE ORLEN
GROUP
Drilling
rig
THE ORLEN GROUP
As at the end of 2012, PKN ORLEN directly held
shares in 54 commercial-law companies, including in:
» 33 subsidiaries (over 50% interest),
» 2 jointly controlled companies (50% interest),
» 19 other companies.
– purchase of 676,481 shares on March 9th 2012, resulting in PKN
ORLEN’s interest in RNJ’s share capital increasing by 8.76%,
to 98.62%;
– buy-out of 70,938 shares on August 23rd 2012, resulting in PKN
ORLEN’s interest in RNJ’s share capital increasing by 0.91%,
to 99.53%;
SHAREHOLDING CHANGES
IN 2012
– purchase of 1,574 RNJ shares (representing 0.02% of its share
capital) on September 17th 2012, resulting in PKN ORLEN’s
interest in RNJ’s share capital increasing to 99.55%;
– purchase of 35,196 RNJ shares (representing 0.45% of its
In 2012, the following shareholding changes were made in the ORLEN
Group:
share capital) on October 4th 2012, resulting in PKN ORLEN’s
interest in RNJ’s share capital increasing to 100%.
» Increase in PKN ORLEN’s interest in the share capital of IKS ‘Solino’
to 100% during the course of the year through a series of pur-
» Sale of the entire shareholding in ORLEN Capital AB to S-bolag
Borsen AB on April 11th 2012.
» Increase in PKN ORLEN’s interest in the share capital of ORLEN
chases of shares from minority shareholders:
– first purchase of January 31st 2012 (16,226 shares), resulting
Projekt through a series of share purchases from minority interests:
in a 0.85% increase in PKN ORLEN’s interest in IKS Solino’s
– purchase of 7,020 shares from October 1st to 3rd 2012, resul-
share capital, to 99.02%;
ting in PKN ORLEN’s interest in ORLEN Projekt’s share capital
– subsequent squeeze out of September 3
rd
2012, involving
increasing by 51%, to 97.8%;
18,828 shares (representing 0.98% of IKS Solino’s share capital)
– purchase of another 232 shares on October 10th and 16th
and resulting in PKN ORLEN becoming the sole shareholder
2012, resulting in PKN ORLEN’s interest in ORLEN Projekt’s
in IKS ‘Solino’.
share capital increasing to 99.35%;
» Increase to 100% in PKN ORLEN’s interest in the share capital
– purchase of 43 shares on November 20th 2012, resulting
of ANWIL through a series of share purchases from minority
in PKN ORLEN’s interest in the ORLEN Projekt’s share capital
interests:
increasing to 99.63%.
– purchase of 13,975 shares on March 9th 2012, resulting in PKN
» Purchase of a 49% interest in Petrolot Sp. z o.o. from PLL LOT
ORLEN’s interest in ANWIL’s share capital increasing by 0.11%,
on December 21st, resulting in PKN ORLEN’s interest in the share
to 95.25%;
capital of Petrolot Sp. z o.o. increasing to 100%.
– purchase of 3,414 shares on June 6th 2012, resulting in PKN
» Execution of an agreement providing for the sale of PKN ORLEN’s
ORLEN’s interest in ANWIL’s share capital increasing by 0.025%,
entire shareholding in Śląskie Centrum Logistyki SA on December
to 95.27%;
18th 2012. The transaction is to be settled on July 31st 2013.
– purchase of 575,334 ANWIL shares (representing 4.26% of its
share capital) on September 14th 2012, resulting in PKN ORLEN’s
interest in ANWIL’s share capital increasing to 99.54%;
OUTLOOK FOR THE COMING YEARS
share capital) on October 17th 2012, resulting in PKN ORLEN’s
The primary objective of the ORLEN Group’s strategy is to build
interest in ANWIL’s share capital increasing to 99.72%;
an integrated, multi-segment fuel and energy sector company with
a diversified asset structure (the multi-utility model). Our main growth-
st
share capital) on October 31 2012, resulting in PKN ORLEN’s
oriented investment projects are focused on the new business segments,
interest in ANWIL’s share capital increasing to 100%.
such as exploration and production of hydrocarbons and production
» Increase to 100% in PKN ORLEN’s interest in the share capital
of Rafineria Nafty Jedlicze (RNJ) through a series of share purchases
from minority shareholders:
74
of electricity. These activities are conducted both independently and
in cooperation with domestic and foreign trade partners.
We are consistently building our hydrocarbon exploration and produc-
Measures taken by the ORLEN Group are designed to:
tion segment, while trying to maintain an acceptable level of risk.
» strengthen segment management mechanisms in place
ORLEN Upstream, an exploration and production company established
for that purpose, performs evaluations of production projects, assessing
their technical potential and the rationale of the planned acquisi-
at the ORLEN Group,
» increase the efficiency of the Group’s core business companies,
» exit companies operating outside the PKN ORLEN’s core business.
tions. The on-going monitoring of the global market of production
projects gives us full insight into the acquisition opportunities offered
by the market.
As at the end of 2012, the individual Group companies were allocated to the following business areas:
CEO
AREA
FINANCE
AREA
PETROCHEMICALS
AREA
REFINERY
AREA
SALES
AREA
ORLEN Upstream
100.0%
ORLEN Ksiêgowośæ
100.0%
Basell Orlen Polyolefins
50.0%
AB ORLEN Lietuva
100.0%
ORLEN Gaz
100.0%
ORLEN Intern.
Exploration & Prod. Co
100.0%
ORLEN Holding
Malta Ltd
99.5%
ANWIL
100.0%
ORLEN Asfalt
82.5%
ORLEN Paliwa
100.0%
ORLEN Ochrona
100.0%
ORLEN Insurance Ltd
0.0000066%
ORLEN Laboratorium
94.9%
100.0%
ORLEN PetroTank
100.0%
17 other companies
<20.0%
ORLEN Finance AB
100.0%
ORLEN Projekt
99.6%
Rafineria Trzebinia
86.4%
Ship Service
60.9%
ORLEN Administracja
100.0%
Unipetrol
63.0%
ORLEN OIL
51.7%
ORLEN Deutschland
100.0%
P³ocki Park Przemys³owo-Technologiczny
50.0%
ORLEN Automatyka
100.0%
ORLEN Centrum
Serwisowe
99.0%
ORLEN Medica
100.0%
ORLEN Wir
76.6%
IKS ‘Solino’
100.0%
ORLEN Eko
100.0%
Naftoport
18.0%
ORLEN Budonaft
100.0%
ORLEN KolTrans
99.9%
Baltic Power
100.0%
ORLEN Transport
100.0%
Baltic Spark
100.0%
Petrolot
100.0%
75
08
Gas production
In the United States, shale gas accounts
for approximately 14% of total natural
gas production and can be successfully
exported to Europe and other parts
of the world.
Employment potential
In the United States, unconventional crude
oil and natural gas production has contributed to the creation
of over a million new jobs so far.
According to estimates by InformationHandling Services, Inc. (IHS Inc.),
as many as 800,000 more new jobs
in this segment may be created by 2015.
There are currently 360,000 jobs directly
related to the production of natural gas
in the United States. Another 537,000
workers are employed by transport
companies delivering materials required
for drilling.
EMPLOYEES
Gas
production
work
EMPLOYEES
Employees are among PKN ORLEN’s key assets.
Their commitment, energy, reliability and identification
with the Company drive the entire ORLEN Group
and provide it with a competitive edge.
We are one of the largest crude oil refiners in Central and Eastern Europe.
In terms of gender, men represented the majority of the staff at PKN
ORLEN, Unipetrol Group and ORLEN Lietuva Group, at approximately
81%, 74% and 67% respectively
HUMAN RESOURCES POLICY
AND PROGRAMMES
As at the end of 2012, the Group’s headcount stood at 21,956
people, of which:
Recruitment policy
»
»
»
»
4,445 were employed at PKN ORLEN
In 2012, the ORLEN Group’s recruitment policy was focused on at-
4,062 – at the Unipetrol Group
tracting highly qualified specialists whose knowledge and skills,
3,148 – at the ANWIIL Group, and
combined with the experience and professionalism of our existing
2,284 – at the ORLEN Lietuva Group.
staff, would allow us to ensure the continuity and highest quality
of ORLEN’s business processes, and support the process of transfor-
Our employment policy, which focused on ensuring an optimum head-
mation of the ORLEN Group into a multi-utility.
count necessary for the execution of the Company’s objectives, was
influenced by two key factors. The first was the restructuring at the ORLEN
We continued to implement the Adaptation Programme, which will
Lietuva Group, the Unipetrol Group and the Rafineria Trzebinia Group,
allow newly hired employees to get to know the Company’s opera-
which downsized the workforce by 586 persons (y-o-y). The other factor
tions and its organisational culture. Besides an introductory meet-
was our development activity, such as the growth of the upstream seg-
ing and participation in workshops with experts from various areas
ment (ORLEN Upstream), entry into new markets (establishment of ORLEN
of the Company’s operations, as part of the Adaptation Programme
Apsauga UAB), and winning of new contracts (ORLEN Transport and
employees also took part in an e-learning training programme which
ORLEN Wir), which resulted in a headcount increase.
covered both the ORLEN Group’s history and current organisational
WORKFORCE STRUCTURE
and employee issues. In 2012, the Adaptation Programme was
expanded by adding a new component concerning the values and
rules of conduct and a site visit to a service station.
As at the end of 2012, employees with higher education were the largest group among PKN ORLEN staff, whereas in the Unipetrol Group,
Human resources policy
most employees had secondary education, and in the ORLEN Lietuva
In 2012, the Policy for the Management of the Potential of ORLEN
Group – vocational education.
Group Employees for 2013-2017 was approved. The policy sets out
the rules of conduct and good practices to be applied in such areas
Employees aged 31 to 40 formed the largest group at PKN ORLEN,
as recruitment and adaptation, employee qualification evaluation,
while in the ORLEN Lietuva Group and the Unipetrol Group most
training and development, remuneration and employee mobility
workers were aged between 41 and 50.
management.
Employment structure by education (%)
78
Higher education
Secondary education
Vocational education
Primary education
Employment structure by age (%)
<31
31-40
41-51
51-60
>60
Employment structure by gender (%)
Women
Men
PKN ORLEN
Unipetrol
ORLEN Lietuva
53.2
39.3
6.5
1.0
19.0
43.1
32.8
5.1
36.1
17.5
38.9
7.5
12.1
30.1
26.9
26.8
4.1
7.7
23.7
34.6
28.8
5.2
8.6
23.6
36.5
28.2
3.1
18.9
81.1
26.4
73.6
33.0
67.0
Strategic directions for HR development at the ORLEN Group:
we have been implementing the Work Placement Programme in col-
» development of the corporate culture on the basis of the adopted
laboration with job centres across Poland. Under the programme,
values,
» development of a modern corporate HR structure supporting
the managers,
» implementation of the best HR practices, standards and tools
at the Group,
» constant improvement of the effectiveness and quality of HR
processes at the ORLEN Group.
trainees enter different areas of the Company’s business on paid
work placements that last several months. In 2012, the work placement programme was mainly focused on the production area, but
trainees also gained experience in finance and support. Following
the end of the programme, selected trainees were employed by
PKN ORLEN. In 2012, we once again took part in the nationwide
‘Grasz o staż’ (‘Win a Work Placement’) competition and funded
paid work placements for five winners.
Development of Business Partner HR’s functions
We continued our work on the development of our Business Partner
In 2012, a total of over 350 trainees participated in student internship
HR system’s functionality. The solutions developed in 2012 signifi-
and work placement programmes at PKN ORLEN.
cantly improved the effectiveness of our HR processes and enhanced
the quality of day-to-day support offered to managers at all levels.
In 2012, in addition to the internship and work placement programmes, we also organised educational and informational events ad-
Business Partner HR was expanded to include ORLEN Group companies
dressed to university and secondary school students, such as an open
in order to ensure the consistency of the HR solutions implemented
day with our Recruitment Team – ‘Questions about Recruitment’, and
at PKN ORLEN.
a series of meetings at schools and universities under the banner
of the ‘ORLEN Knowledge Day’.
Professional development and training
As in the previous year, our activities in the area of professional
Employee benefits
development and training focused on strengthening employee
We provide our employees with various benefits, such as co-financing
qualifications to secure our business goals and develop a desirable
of employee holidays, spa treatment, rehabilitation, child care, recrea-
organisational culture. One of the key events was organisation
tion and sports activities, as well as cultural and educational activities.
of a training programme for the management staff following imple-
These also include non-repayable allowances, repayable housing
mentation of the Company’s new corporate values. The workshops
loans and Christmas presents or vouchers for employees’ children.
were designed to show the role of all employees in the development of the Company’s organisational culture and implementation
Awards and certificates
of ethics standards in our day-to-day work. The central development
Our HR policies and practices have been assessed by independent
programmes for the management staff and production process fore-
organisations that have evaluated the basic benefits, additional
men were expanded to include a Value Based Management module.
benefits, work conditions, training and development programmes,
professional career development and the management of the Com-
In 2012, key growth-oriented projects were continued, including
pany’s organisational culture. The result of these assessments and
the talent project and the development workshops for managers.
evaluations are the following distinctions and awards:
More than seven thousand PKN ORLEN and Group employees were
» a ‘Top Employers 2012’ certificate awarded by the Corporate
trained under our training and development programmes.
Research Foundation,
» first place in the ‘Most Sought after Employers According to Man-
Student internships and work placement programmes
agers and Professionals in 2012’ ranking in the Energy, Fuels and
We care for the professional development of not only our own
Gas category – the 3rd edition of the Antal International survey,
employees, but also young people just entering the workforce, such
» a ‘Trustworthy Employer’ title in the Mining Industry category,
as university graduates and school leavers, by providing them with
awarded by the judging panel of the 3rd Trustworthy Employer
an opportunity to gain their first professional experience as interns
Competition.
and on work placement programmes. Accordingly, since 2002
79
09
PROTECTION
OF THE NATURAL
ENVIRONMENT
Shale gas is an opportunity for Polish
power plants to produce cheaper energy,
which would ultimately result in lower
retail prices. The emergence of a new
source of fuel will accelerate the process
of modernisation and expansion
of the energy generation infrastructure,
while the potential increase in the share
of natural gas in Poland’s overall energy
mix will allow Poland to adapt sooner
to the EU’s climate requirements
by reducing CO2 emissions.
PR OT ECTION
OF THE N AT U RA L
EN V IRONMENT
CO 2 emissions
reduction
P R OTECT ION OF T HE NATURAL ENVI RO NM ENT
In 2012, the Company adopted a new mission,
which also had an important effect
on the protection of the natural environment:
We discover and process natural resources
to fuel the future.
This wording obliges us to take particular care
of the natural environment in all our activities.
ral environment were conducted in compliance with existing and
expected environmental standards. We managed to maintain full
compliance with applicable laws and standards for pollution prevention. We monitored the quality of the environment, the emission and
distribution of substances in the air, soil, ground, and underground
waters, as well as their influence on human life. Because of this,
permitted pollution limits were under constant control, allowing
us to remain within acceptable limits.
RESPONSIBILITY, also understood as respect for the environment,
Key projects announced and implemented in 2012 included:
is one of the most important values and standards of conduct
» change of the terms of the integrated permits for the installations
adopted by PKN ORLEN in September 2012.
in the Production Plant in Płock and the PTA Plant in Włocławek,
providing for technological changes in the installations and op-
The strategy for 2013-2017 combines financial and environmental
goals. The most important of these are:
timisation of their operating conditions,
» obtaining additional CO2 emission allowances for the installa-
» maximising the efficiency of our refining assets to improve
tions in Płock from National Allocation Plan 2. Thanks to active
the efficiency of the refining segment, and consequently to improve
and appropriate management of the obtained CO2 emission
the metrics indicating the scale of these processes’ environmental
allowances in late 2012, at the end of the second Trading Period
impact,
of 2008-2012 we managed to maintain an excess allowance for
» developing further operational improvements in the petrochemical
segment in order to decrease emissions per unit of petrochemicals
produced,
PKN ORLEN, which allows us to be optimistic about the third
Trading Period of 2013-2020,
» continued improvement of the IT system for monitoring CO2
» increasing retail sales at PKN ORLEN service stations which fulfil
emissions. We initiated the process of adding new installations
the technical requirements ensuring lower impact of distribution
(Ethylene Oxide and Glycol, PTA) and new production units
processes on the natural environment,
at the refinery (Aromatics Extraction, Paraxylene, Pyrolytic Gaso-
» developing new power and heat generation capacities – new
line Hydro-generation PGH-1,2, Hydrogen Sulphide Utilization)
power units will co-generate power and heat from natural gas;
to the system. This will enable us to quickly provide reliable data
these units are characterised by very high efficiency and low
emissions and are in line with all EU emission standards for new
combustion plants,
on the amount of CO2 emission,
» ensuring optimised spending on soil and underground water
reclamation. 2012 was another year of large-scale soil and
» developing the oil and gas production segment – the uncon-
water reclamation works in polluted areas of service stations,
ventional gas deposits in Poland give us a unique opportunity
fuel terminals and separate assets (storage depots, petroleum
to reduce emissions from power production, including of CO2
production sites). The works, carried out on 159 facilities, were
emissions, by increasing the share of this ecological fuel in energy
often conducted using different methods, including extraction
generation.
and off-site neutralisation of soil masses. In seeking to optimise
the costs of these works, we managed to lower the average
The objectives of the Strategy, though officially adopted in late
extraction and neutralisation cost per tonne of polluted soil
2012, had already determined many of the Company’s actions
by approximately 20% relative to 2011.
throughout the year.
In 2012, we started implementing important environmental investLast year we managed to reaffirm our leading position not only
ments concerning reduction of sulphur dioxide, nitrogen oxides and
at the sector or industry level, but also in environmental protection.
dust emissions. As a part of the pro-environmental project to adapt
In 2012, all PKN ORLEN’s actions concerning protection of the natu-
our CHP plant to the requirements of the Directive on Industrial
Emissions (IED), we finished the construction of the K8 boiler.
82
Moreover, we prepared an Environmental Impact Report, covering
In 2012, as a means of encouraging employees to expand their
all elements necessary for constructing the installations supporting
knowledge of the idea and principles of the Responsible Care
environmental protection, that is installations for nitrogen, dust and
Programme, we helped to organise a series of competitions re-
sulphur removal from flue gas, along with necessary infrastructure.
lated to events important to the protection of the natural environ-
We also obtained a decision on environmental conditions, approving
ment, such as Noise Awareness Day (April 25th), World Water Day
the chosen methods of pollution reduction. The decision enables
(March 22nd), World Environment Day (June 5th), and World Smoke-
us to apply for construction permits for the individual installations
out Day (November 16th). The idea for the competitions came from
and infrastructure. The planned installations will enable reduction
the Secretarial Office of the Responsible Care Programme, who also
of SO2, NOx and dust emissions by over 90%, contributing to better
sponsored the awards.
air quality in the vicinity of the plant.
While implementing the Framework Responsible Care Management
The first effects of these actions will be visible in 2013, when two
System in 2012, we assessed the stage of our own implementation
boilers with flue gas denitrification systems and dust collectors are
of the individual elements of the Responsible Care Programme.
brought online.
The result of this assessment fell into the >80% category, which
is referred to as ‘full implementation, continuous improvement’.
In 2012, the environmental impact of the Company’s production,
storage and distribution facilities did not exceed the permitted limits.
Apart from improving the Framework Responsible Care Management
Consequently, no fines were imposed following inspections
System, in 2012 we fulfilled tasks in the area of Health, Safety and
by the Provincial Inspectorate for Environmental Protection.
Environment (HSE). Out of the 53 declared tasks, 32 were completed,
and the fulfilment of another 17 will be continued in 2013.
As regards the environmental impact of the largest refinery complex, the Płock Production Plant, emissions fell by 1.86%, including
In addition to reporting and obligatory activities, we participated
nitrogen oxides by 2.60%, sulphur dioxide by 1.46%, and carbon
for the sixth time in the organisation of the environmental ‘Catch
dioxide by 1.87%, with a simultaneous 4.43% increase in crude
the Hare’ photo competition, which promotes the beauty of nature
throughput in comparison with 2011. Total emissions, including from
and involves employees from companies implementing the Respon-
the PTA Plant in Włocławek, are presented in the table on page
sible Care Programme. Among the winners of this year’s national
84 of this report.
edition of the contest was a PKN ORLEN employee. The winning
photos were included in the 2013 calendar, issued by the Secretarial
An important part of our environmental tasks in 2012 was
Office of the Responsible Care Programme.
co-ordination of environmental efforts among the Group companies. The result of those efforts was the third Environmental Report
For six years now, 226 PKN ORLEN employees have taken part
of the ORLEN Group.
in the local stage of the competition, organised by the Environmental
Protection Office and the Corporate Communication Office. In the final
PKN ORLEN also undertakes voluntary initiatives as part
national round, the judges evaluated over 700 photos, which proves
of the Responsible Care Programme (Odpowiedzialność i Troska).
the popularity of the competition. Employees of PKN ORLEN have twice
2012 was the twentieth anniversary of the implementation
been awarded the main prize at the national stage of the competition
of the Responsible Care guidelines in Poland. The Company has
(2009 and 2012). The winner in 2007 was an employee of ANWIL.
participated in the Programme for 15 years. For its long-term
commitment and fruitful co-operation, PKN ORLEN was awarded
We operate in accordance with environmental laws and the principles
a distinction during last year’s 8th Ecological Forum of the Chemicals
of sustainable growth and corporate social responsibility. In 2012,
Industry in Toruń. The key principle for those who run the Pro-
the judges of the ‘Environment-Friendly’ competition honoured
gramme is the development of social awareness. Companies engage
PKN ORLEN with a European Ecological Award, which recognises and
in dialogue with their employees, local community, customers and
promotes us as an environmentally friendly company of the new EU,
suppliers to get to know each other’s needs as well as possible.
taking active steps to protect and change the natural environment.
83
AIR PROTECTION
ANWIL
In 2012, total air emissions of substances from PKN ORLEN instal-
» Construction of a shelter at the A-2 Nitrate Plant with a flooring
lations did not exceed the limits set in the integrated permits for
that prevents potential migration of the nitrous fertilizer into
the Płock and Włocławek plants.
the ground during rainfall.
» Construction of a drying plant for the residue from the wastewater
Air emissions fell slightly in 2012 relative to 2011, despite higher
treatment facility at the ES Water and Wastewater Management
volumes processed at the Płock Production Plant and increased
Plant which enables the sewage sludge that remains after biological
production at the Włocławek PTA Plant.
wastewater treatment to be utilized. Furthermore, the flue gas
from the cogeneration unit, which will be fuelled by the biogas
In 2012, companies of the ORLEN Group were engaged in various
activities aimed at reducing the impact of their operations on the en-
obtained in the process of anoxic treatment of the wastewater
from the PTA Plant, will serve as a source of heat.
vironment. For instance, they continued selective collection of mu-
» Organisation of the ‘Tree for a Bottle’ educational campaign and
nicipal waste and made more rational use of the environment with
the ‘Academy of Ecological Skills’ project as part of the Responsible
respect to intake of water and discharge of wastewater. The table
Care programme.
below shows the companies that contributed to the ORLEN Group’s
considerable achievements in 2012 in the area of environmental
protection.
Total emissions of selected substances by the Płock Production Plant and the Włocławek PTA plant
in 2011-2012
Emission volume [Mg]
2011
» » » 2012
increase/decrease
[%]
20,972.27
20,668.83
-1.4
Nitric oxides (in nitrogen dioxide equivalent)
8,066.17
7,873.61
-2.4
Carbon monoxide
1,582.00
1,802.03
13.9
Total hydrocarbons
1,204.68
1,189.92
-1.2
590.90
680.28
15.1
6,288,163.72
6,256,593.17
-0.5
Substance
Sulphur dioxide
Total dust
1)
Carbon dioxide
Other substances
Total emissions of substances, excluding carbon dioxide
Total emissions of all substances PKN ORLEN
1) total dust, i.e. combustion dust, silica dust and metals in the dust
84
185.78
144.94
-22.0
32,601.79
32,359.62
-0.7
6,320,765.52
6,288,952.78
-0.5
Basell Orlen Polyolefins
ORLEN Eko
» Installation of energy carrier measurement systems on the PP3
» Construction and start-up of a central hazardous and non-haz-
Unit to enable monitoring of the quantities of energy carriers
ardous waste shredding facility to reduce the quantity of waste
consumed.
» Participation in the ‘Catch the Hare’ environmental competition.
» Participation in the ‘Clean up the World’ campaign.
» Joint organisation of a conference to mark the 13th County
Earth Day, with ‘Good Energy from Polyolefins for Everyone’
handed over for landfilling.
» Implementation of the ‘Company Close to the Environment’
programme.
ORLEN Gaz
as the slogan.
Inowrocławskie Kopalnie Soli ’Solino’
» Implementation of projects preventing serious industrial failures.
» Obtaining approval for the updated Safety Report on the placement of an additional four underground tanks with a cubic
» Modernisation of the storm water drainage oil-trap to protect
capacity of V=197 m3.
the receiving water from hydrocarbons.
» Reconstruction of piezometers to improve the monitoring of un-
ORLEN OIL
derground water.
» Thermal improvement of selected buildings to improve their
thermal characteristics.
» Modernisation of storage tanks, which included fitting the tanks
with a second bottom wall to prevent any potential leakage
of their contents into the ground.
ORLEN Asfalt
» Continuation of research work related to developing a proprietary technology for obtaining base oils of plant origin, meeting
» Reduction of installations’ energy requirements by changing
the means of heating of the storage tanks.
» Lowering heat emissions by changing the insulation in the production installations area.
the European Ecolabel requirements.
» Further development of the portfolio of 5W-30 class oils intended
for the latest passenger car engines meeting emission standards
and providing the additional benefit of lower fuel consumption.
ORLEN Centrum Serwisowe
ORLEN PetroTank
» Purchase of a set of cleaning devices and developing a new
» Modernisation of the tank field at the Bliżyno and Kąty service
technology for the clean-up and maintenance of fuel tanks.
» Purchase of new EURO 5-compatible vehicles contributing to mini-
stations to reduce the risk of contamination of the waters and
soils neighbouring the stations.
mising the emission of substances into the air and lowering
the costs of depreciation and emission charges.
» Reduction of the quantity of fuels consumed by vehicles subject
to maintenance services by monitoring them using vehicle-mounted
GPS devices.
» Selective collection of non-municipal waste to benefit from lower
costs of acceptance of segregated non-municipal waste.
» Correspondence training on environmental protection, including
waste-handling procedures.
» Recovery of electronic components from dismantled electronic
equipment.
85
ORLEN Lietuva
» Exchange of D-4 and D-5 burners and mounting of new, higher
» Modernisation of a storage tank park, which included putting
efficiency burners, contributing to lower fuel consumption.
» Construction of a desulphurisation and sulphur granulation unit
to reduce the emissions of H2S and dust.
in place safeguards to prevent petroleum products from penetrating into the ground, as well as a system to monitor leakages.
» Modernisation of railway infrastructure, involving safeguarding
» Construction of a device for treating surface wastewater from
railway bays intended for loading and unloading raw materials
the power plant to reduce contamination of the Vaduva river by
and petroleum products, to prevent those materials and products
rainfall wastewater.
» Update of an application with data on CO2 emission allowances
for 2013-2020.
» Update of a decision concerning hazardous waste management.
» Implementation of QAL2 based on the EN 14181 standard for
continuous monitoring of emissions.
infiltrating the soil and ground water.
» Modernisation of the wastewater treatment plant central floatation unit and of a network of water pipelines, involving reduction
of the quantity of generated waste.
» A ‘Zielony Laur 2011’ (Green Laurel Wreath 2011) certificate.
» A ‘Panteon Polskiej Ekologii 2012’ (Stars of Polish Ecology 2012)
title.
ORLEN Transport
Paramo
» Replacement of the fleet, purchase of EURO 5-class semi-trailer
trucks.
» Withdrawal of EURO 2-class semi-trailer trucks to ensure lower
CO2 emissions.
» Introduction of Systematic Business Management, including
rational waste management and reduction of CO2 emissions
» Reconstruction of a pipeline in connection with the implementation of Best Available Techniques (BAT).
» Reconstruction of a storage tank in order to eliminate the risk
of contamination of surrounding soils and waters.
» Continued reclamation work on old pollution sites.
by performing transport services using the new fleet.
SHIP-SERVICE
Petrolot
» Raising of employees’ qualifications and awareness by training
» Laying of tight road surfaces within the premises of the aviation
fuels station in Bydgoszcz; drainage of hard surface areas and
installation of a petroleum product separator.
» Replacement of single-shell tanks by double-shell tanks at the premises of the Szczecin aviation fuel station.
them on regulatory changes, as well as safe handling and transport
of goods under ADR.
» Purchase of additional transport and loading equipment for collection of hazardous waste to accommodate the special needs
of ships in ports.
» Replacement of a fuel oil storage tank at the premises of the fuel
terminal in Warsaw to protect the soil against contamination
Unipetrol Doprava
by petroleum products.
» Construction of a treated wastewater recirculation system with
a view to optimising consumption of treated water.
» Continued reclamation work on old pollution sites.
86
KEY GOALS AND CHALLENGES
TO PKN ORLEN’S ENVIRONMENTAL
IMPACT IN 2013
Key projects envisaged for implementation in 2013 include:
» development of the ENVI environmental information exchange
platform,
» elaboration of the final concept for further use of the waste
disposal site on the premises of PKN ORLEN’s plant in Płock,
» ensuring the effective use of the ORLEN Group’s potential in waste
management,
» promotion of measures and practices minimising emissions as well
as the energy and raw material intensity of industrial processes
» Further improvement of the CO2 emission monitoring processes
at the installations of the Płock Production Plant and the Włocławek
PTA Plant,
» modernisation of the ambient air pollutant concentration quality
monitoring system,
» implementation of PKN ORLEN’s strategy and values regarding
environmental protection,
» development of the system of selective collection of municipal
waste.
87
10
Technological
progress
Only two decades ago horizontal drilling
was perceived as a highly complex
technical process. In the mid-1990s,
horizontal drilling began to be used
for optimising the production
of hydrocarbons from conventional oil
and gas accumulations, as it could
enlarge the surface of contact
between the well and the reservoir rock.
That helped to popularise and improve
the technology.
Directional drilling
The advancement which has led
us to the point where we are able
to produce gas from shales was made
possible thanks to innovations
in hydrocarbon production techniques.
It was not before directional drilling
began to be used on a wider scale,
and the hydraulic fracturing technology
was appropriately modified, that
it became possible to extract
the gas trapped in source rock
on a commercial scale.
M AT E R I A L
MARKET
RISKS
Horizontal
drilling
MATERIAL MARKET RISKS
Conducting activities in various areas,
we are aware of the associated risks
and challenges. We do understand that those
risks and challenges may affect our business
processes. Therefore, we endeavour to minimise
their effect by constant risk monitoring
and management.
LIQUIDITY RISK
The ORLEN Group is exposed to liquidity risk related to the ratio
of current assets to current liabilities. As at December 31st 2012,
the current ratio was 1.7.
In 2007, a bond issue programme was launched at the ORLEN Group.
Thanks to bond and note issues, the ORLEN Group is able to raise
CREDIT RISK
funds outside the traditional banking sector, from other financial
institutions, corporations and individuals. The bond issue programme
is also used in liquidity management at ORLEN Group entities on both
In the course of its trading activity, the ORLEN Group sells products
domestic and international markets. In 2012, the Group issued bonds
and services to business entities on a deferred payment basis, which
and notes exclusively on the domestic market.
may give rise to a risk of default on the part of the customers
receiving our products or services.
In order to optimise finance costs, the ORLEN Group has in place
a PLN cash pool system, which as at December 31st 2012 included
In order to minimise credit risk and keep working capital as low
23 ORLEN Group companies, as well as an international cash pool
as possible, the ORLEN Group manages risk using the applica-
system covering funds denominated in EUR, USD and PLN, and
ble procedure for assigning trade credit limits to contractors and
including PKN ORLEN and foreign companies of the ORLEN Group
by specifying the form of collateral.
(ORLEN Finance, ORLEN Lietuva, ORLEN Deutschland, Unipetrol, a.s.
and the Unipetrol Group companies).
Credit risk is assessed on a case by case basis for each customer
purchasing products or services against a deferred payment. Receivables are partially insured under trade credit insurance programmes
MARKET RISKS
and are monitored regularly. In line with the applicable procedures,
whenever any receivable becomes past due, sale to a given customer
At PKN ORLEN, the principles of market risk management are imple-
is suspended and collection procedures are initiated.
mented by designated organisational units supervised by the Financial
Risk Committee of PKN ORLEN, the PKN ORLEN Management
The ORLEN Group deems the credit risk related to its cash and bank
Board, and the PKN ORLEN Supervisory Board. The Financial Risk
deposits as low. All entities with which the ORLEN Group invests free
Committee operating at PKN ORLEN is responsible for supervision
cash operate in the financial sector. They include domestic banks
and coordination of financial risk management at the ORLEN Group.
and branches of foreign banks enjoying the highest (82% of funds
invested) or good (18% of funds invested) short-term credit rating.
Financial risk management is designed to mitigate the undesired
impact of changes in market risks on cash flows and performance
Credit risk related to positive measurement of derivatives is deemed
in the short and medium term.
low, given the fact that all relevant transactions are concluded with
banks enjoying high credit rating. One of the main bank selection
Market risk management is based on hedging strategies using
criteria is a credit rating of at least A.
derivative instruments. Derivative instruments are used exclusively
to mitigate the risk of fair value and cash flow changes.
The ORLEN Group uses exclusively those instruments which it is able
to measure internally using its standard valuation models. In determining the market value of financial instruments, the ORLEN Group
90
relies on information received from leading banks, brokerage firms
In addition to comprehensive insurance of assets, the ORLEN Group
and financial news services. Transactions are concluded exclusively
also holds other insurance policies enabling it to minimise the adverse
with reliable parties, admitted upon completing appropriate proce-
effects of losses, such as business liability insurance or transporta-
dures and signing relevant documents.
tion insurance.
The main market risks to which the ORLEN Group is exposed include:
» Risk related to prices of raw materials
and petroleum products
» Foreign exchange risk
The ORLEN Group’s operating activities expose it to the following risks:
The ORLEN Group is exposed to foreign exchange risk connected
– risk of changes in the prices of crude oil purchased for processing,
with current receivables and payables, cash and cash equivalents,
– risk related to the obligation of maintaining mandatory stocks
capital expenditure, liabilities under loans, borrowings and its own
bonds denominated in foreign currencies, as well as future planned
cash flows from the sale and purchase of merchandise, as well
as refinery and petrochemical products. FX exposure is hedged with
forwards or swaps.
of crude oil and fuels,
– risk of changes in the Brent/Ural differential (differences in prices
of these crude grades),
– risk of changes refining and petrochemical product prices which
depend on crude oil and product prices on global markets.
The USD/PLN exchange rate is, to a certain extent, hedged naturally,
As at December 31st 2012, the Group disclosed instruments hedg-
as the USD-denominated revenue from sales of products is accompa-
ing the risk of changes in prices of raw materials and petroleum
nied by USD-denominated cost of crude oil purchases. The EUR/PLN
products. Such instruments were used to hedge cash flows related
exchange rate is material to the EUR-denominated revenue from
to the sale/purchase of crude oil, gasolines and diesel oil, as well
sales of petrochemical products. For those items, natural hedging
as product margins.
is limited and occurs, for instance, with respect to EUR-denominated
loan interest or certain investment purchases.
» Risk related to supplies of raw materials
» Interest rate risk
Raw materials are mostly supplied to the ORLEN Group through
pipelines, by road and rail, and by sea. Risk related to supplies of raw
The ORLEN Group is exposed to the risk related to changes in cash
materials is connected with the need to ensure timely supply of raw
flows from interest on bank loans, borrowings and floating rate
materials to production facilities.
debt securities and derivative transactions hedging cash flow risk.
Material factors having a bearing on the supply of raw materials
» Risk of losses related to our operations
to ORLEN Group companies mainly relate to the political situation
and non-recurring losses
in the countries exporting crude oil, technical condition of pipelines
and railways, as well as maritime weather conditions.
The ORLEN Group is exposed to the risk of losses incurred
in the course of its business activity and the risk of non-recurring
PKN ORLEN takes steps designed to ensure the steady supply of raw
losses. As part of its risk management, the ORLEN Group minimises
materials mainly by diversifying supply sources and adapting produc-
potential adverse effects of such losses with a professional insurance
tion facilities to processing various grades of feedstock. Moreover,
programme customised to its needs. The programme is developed and
the ORLEN Group is implementing a number of conventional and
relevant insurance agreements are concluded by a dedicated captive
unconventional exploration projects with a view to securing its own
insurance company, ORLEN Insurance Ltd. incorporated in Malta.
sources of natural gas and crude oil.
91
MATERIAL MARKET RISKS
» Risk of changes in the legal environment
for the purposes of the NIT. The Act on Fuel Quality Monitoring and
Control Systems will also be amended following the implementation
The risk related to changes in legal regulations mainly concerns
of new requirements with respect to monitoring and reduction of GHG
the following areas of the ORLEN Group’s operations:
emissions from fuels and energy consumed in the transport sector
– legal regulations pertaining to biofuels,
(introduction of National Reduction Targets – NRT). Also, an update
– upper limits for the number of allocated carbon allowances,
to the Regulation to the Council of Ministers on National Indicative
– legal regulations applicable to ‘colour’ certificates,
Targets for 2014-2019 may be expected in the future.
– accumulation and maintenance of mandatory stocks.
CO2 EMISSION ALLOWANCES
BIOFUELS
The regulatory framework governing CO2 emission allowances
The regulatory framework governing biofuels is laid down in:
is laid down in:
» the Act on Biocomponents and Liquid Biofuels of August 25th
» the Environmental Protection Law of April 27th 2001, which
2006, which contains provisions on marketing biocomponents
specifies the conditions for protection of natural resources,
and liquid biofuels as well as rules of setting and achieving
introduction of substances or energy to the environment, and
the National Indicative Target (NIT),
cost of use of the environment,
» the Act on Fuel Quality Monitoring and Control Systems of August
» the Act on the Greenhouse Gas Emission Allowance Trading
25th 2006, which sets the NIT reduction ratio for 2012 and 2013
System of April 28th 2011, which defines, among other things,
at 0.85,
rules of allocation, conditions for awarding and use of emission
» the Regulation of the Council of Ministers on National Indicative
Targets for 2008-2013, dated June 15th 2007, which sets National
allowances, and sanctions for conducting operations without
a required number of emission allowances.
Indicative Target levels for individual years.
Pursuant to the applicable regulations issued pursuant to the Kyoto
As of 2008, fuel producers have been required to achieve the National
Protocol to the United Nations Framework Convention on Climate
Indicative Target, which specifies the minimum share of biocompo-
Change adopted by the European Union, by virtue of a decision
nents and other renewable fuels, calculated according to their calorific
of the Council of Ministers the ORLEN Group companies have been
value, in the total amount of fuels and liquid biofuels consumed
allocated CO2 emission allowances.
during a calendar year in the transport sector.
Each year, the ORLEN Group reviews the number of allowances
At present, legislation work is underway to amend the 2009/30/EC
and determines actions necessary to ensure consistent balancing
and 2009/28/EC directives (ILUC – Indirect Land Use Change).
of any deficit/surplus in line with the rules applicable to intragroup
The amendment requires the achievement of a half of the 10% target
transactions, or transactions on the forward and spot markets,
for the share of renewable fuels in the transport sector in 2020.
as appropriate.
In connection with the ILUC directives, amendments are expected
In the future, the pool of free CO2 emission allowances is expected
to the Act on Biocomponents and Liquid Biofuels to implement
to be reduced early in the third trading period (2013-2020). Further,
the regulations on sustainable development criteria (certification
electricity producers will not receive any free emission allowances.
system/identification of origin of raw materials used for biocomponent
In view of the above, the ORLEN Group may experience partial deficit
production) and second-generation biofuels which are double-counted
of CO2 emission allowances and may incur expenses acquiring such
allowances on the market.
NIT in 2008-2012
Item
NIT level
92
Measure
unit
%
2008
2009
2010
2011
2012
3.45
4.60
5.75
6.20
6.65
In 2012, the ORLEN Group executed a number of transactions
The existing regulations may change as a result of on-going work
to hedge the purchase price of emission allowances, which will be
on a bill to adjust the applicable law to the requirements of EU
redeemed in the future upon settlement of CO2 emissions.
Directive 2009/119/EC. In its current form, the bill implements,
among other things, a new calculation methodology for the level
‘COLOUR’ CERTIFICATES
of intervention stocks and, in consequence, changes the relevant
requirements for businesses. It also introduces a charge on mandatory
The regulatory framework governing ‘colour’ certificates is laid
stocks and regulations governing State supervision over the avail-
down in:
ability of mandatory stocks.
» the Energy Law of April 10th 1997 and the Regulation of the Minister of Economy on electricity produced from renewable energy
Pursuant to Lithuanian law, the required level of mandatory stocks
sources and in high-efficiency cogeneration.
in 2012 was 90 days, with fuel producers and importers keeping 60-day stocks (30-day stocks were maintained by the State).
‘Colour’ certificates are designed to provide support to utilities
In accordance with the legislation of the Czech Republic, manda-
producing electricity from renewable energy sources and in high-
tory stocks of fuel and crude oil are maintained by a dedicated
efficiency cogeneration. The certificates are allocated in an amount
government agency.
corresponding to the amount of energy produced and the structure
of fuel used.
» Risk of changes in fuel consumption
and import trends
At present, work is underway on an act implementing an ‘energy
tri-package’, encompassing the Energy Law, the Gas Law, and Act
A change in trends in fuel consumption and imports may have a mate-
on Renewable Energy Sources. The package provides for extension
rial bearing on the sales volume and the prices of the ORLEN Group
until 2021 of support for electricity production in cogeneration
companies’ products, thus affecting the Group’s financial standing.
(yellow, violet and red certificates) and until 2030 for electricity
production in new (placed in operation as of 2013) cogeneration
According to data from the Energy Market Agency (Agencja Rynku
units (orange certificates).
Energii S.A.), fuel imports to Poland in 2012 were 1,299 thousand
tonnes, having declined year on year by 1,136 thousand tonnes,
As a result, the ORLEN Group is exposed to legal risk related to cer-
or 46.7%. Diesel oil imports shrank nearly 55% y-o-y, to 862 thou-
tificate allocation, risk of changes in certificate prices, and the risk
sand tonnes, which accounted for approximately 66% of all fuel
of substitution fee increases.
imports. The key source markets were Germany (54%), Slovakia
(27%) and Lithuania (13%). It is estimated that in 2012 approxi-
MANDATORY STOCKS
mately 437 thousand tonnes of gasolines were imported to Poland
(less by 17.5% than in 2011). The largest volume of gasolines was
In Poland, the system for maintaining mandatory stocks is governed by:
imported from Germany (57%) and Slovakia (38%).
» the Act on Stocks of Crude Oil, Petroleum Products and Natural
Gas as well as the Rules to be Followed in the Event of Threat
The ORLEN Group’s fuels trading operations are subject to risk
to National Fuel Security or Disruptions on the Petroleum Market,
resulting from the existence of the grey market, chiefly involving
dated February 16th 2007.
the marketing of cheaper fuel and tax evasion.
Under the Act, all companies operating on the fuels market are
High fuel prices have resulted in the fact that there are more and
required to build a stock of crude oil or other fuels (excluding LPG).
more companies selling fuels at below-market prices, which leads
In 2012, the mandatory stock-keeping level was the equivalent
to loss of market balance and, in consequence, adversely affects
of at least 76 days of the producer’s or trader’s average daily pro-
the ORLEN Group’s revenue levels and competitive position. The fuel
duction or import, as appropriate, in the previous year.
industry estimates that approximately one million tonnes of fuels
(or 7% of the fuel market) are sold on the grey market.
93
11
Transmission and
distribution networks
Preparing a deposit for production
requires designing the infrastructure
for gas treatment (purification, dehydration)
prior to its transmission and for its
subsequent supply to the network
(transmission and distribution pipelines,
metering devices, etc.). Gas may
be produced from a single well for
a period ranging from several to 35 years.
Following the completion of production
work, the well is decommissioned
and the land is restored to its original
condition before the start of operations
(land reclamation).
Gas pipeline
When natural gas is to be transported
in large volumes and over significant
distances, the use of gas pipelines
is the only economically viable solution.
Compared with rail transport, pipelines
offer lower costs and much higher
capacity.
C ORP ORATE
GOVE RNANCE
Gas
transport
CORPORATE GOVERNANCE
Observance of corporate governance principles,
compliance with the Code of Best Practice
for WSE Listed Companies, and active
communication with investors help raise market
confidence in our Company. In pursuit
of our objective to increase PKN ORLEN’s value,
we ensure transparency and predictability
for all stakeholders.
CORPORATE WEBSITE
www.orlen.pl
PKN ORLEN has its corporate website, which is a reliable and useful
source of information about the Company for the capital market
representatives. Additionally, for shareholders, investors and stock
market analysts, the Company’s webpage provides investor relations
section (http://www.orlen.pl/EN/InvestorRelations/Pages/default.aspx).
The internet service contents are prepared in a transparent, fair and
A SET OF APPLIED CORPORATE
GOVERNANCE RULES
complete way so as to enable the investors and analysts to take decisions based on the information presented by the Company. The inve
stor relations section is maintained both in Polish and in English.
The Investor relations section is divided into a few tabs, where all
In 2012, PKN ORLEN complied with the ‘Best Practice for Companies
the current and periodical reports published by the Company can
Listed on the Stock Exchange’ (further the ‘Best Practice for WSE
be found, as well as presentations prepared for significant events
Listed Companies’) valid for the Warsaw Stock Exchange. The Code
in the Company with audio and video recording of such events.
of Best Practice for WSE Listed Companies can be found on the website dedicated to the corporate governance at the Warsaw Stock
The Investor relations section contains a lot of modern tools and
Exchange: www.corp-gov.gpw.pl and on the corporate website:
useful to investors and stock market analysts information on the Com-
www.orlen.pl in the ‘Investor Relations’ section dedicated to the Com-
pany. This section is continuously improved in line with the latest
pany’s shareholders under ‘Shareholder services & tools’ in the ‘WSE
market standards.
Best Practice’ tab (http://www.orlen.pl/EN/InvestorRelations/ShareholderServicesTools/Pages/WSEBestPractice.aspx)
One can find there, among others:
» interactive diagrams and tables for quick comparisons of the ComIn 2012 PKN ORLEN applied all the mandatory corporate governance
rules set out in Code of Best Practice for WSE Listed Companies.
pany’s financial ratios in different time periods,
» interactive diagrams and tables showing PKN ORLEN’s shares quotations with a calculator of the return on investment in the Com-
COMMUNICATION WITH
THE CAPITAL MARKET
pany’s stock. These diagrams enable comparison of stock quotations
with the main stock indexes which include the Company’s stock.
To a diagram showing PKN ORLEN share quotations a diagram
The Company undertakes a number of activities to improve communication with its environment. In order to reach a wide range
showing the quotation of one of the indexes: WIG, WIG 20
or WIG-PALIWA (WIG-FUELS) can be attached.
of recipients it applies both traditional and modern tools of com-
» financial statements, gathered in one place together with
munication with capital market representatives. It organizes direct
the presentations that describe them and that were prepared for
internet transmissions with simultaneous translation into English from
the capital market representatives, the records of teleconferences
media conferences following each significant event in the Company’s
with the stock market investors on the occasion of publication
life, such as quarterly results publication, announcement of strategies,
of the financial results and the worksheet with the data from
as well as from the PKN ORLEN General Meeting. Video records
from the conference are stored on the Company’s website, thus,
it is possible to view a selected past event.
the presentations that simplifies the data analysis,
» special form for contacts with the Company in respect
of PKN ORLEN’s General Meetings, in accordance with the rights
of the Commercial Companies Code,
96
» possibility to subscribe to various types of PKN ORLEN’s newslet-
according to changes that occur in the commonly applicable provisions
ters, including the most recent investor relations news. Section
of law. The investor relation section provides also the information
has also RSS feed, that enables all new information placed in it
on the dates of general meetings, draft resolutions and the whole
to reach recipients immediately, particularly in relation to stock
set of documents presented to the shareholders at general meetings.
reports and macroeconomic data.
The Company ensures also communication with its shareholders via
» an option to sign up for reminders concerning the events from
a special online contact form related to general meetings.
the event’s Calendar. One can enter the selected dates to calendars in his mail programs as well as sign up for the events’
Moreover PKN ORLEN has the mobile version of its corporate website,
reminders sent by e-mail or SMS. One can decide before which
adapted to browse the website on the mobile phones and other
events he wants to receive reminders – it can be one or several
mobile devices. By entering the corporate website at www.orlen.pl
of them as well as all events entered to the PKN ORLEN investor
via mobile or smartphone one is automatically redirected to the ser-
relations’ calendar, both in the current and in the next years.
vice m.orlen.pl dedicated to these devices. Users of the mobile
devices can in an easy and fast way access to the key information
For continuous improvements of Investor relations section on
concerning PKN ORLEN known from the original version of www.
www.orlen.pl website and having regard to capital market repre-
orlen.pl, i.a. stock market reports, stock quotations, financial results
sentatives’ information need in 2012:
or press information. The mobile version m.orlen.pl enables also
» new tab ‘Bonds’ was created in the ‘Shareholder services & tools’
establishing a phone connection in a fast way with the Company
section. It presents basic information regarding long term PKN
via function ‘click to call’.
ORLEN’s bonds issue which were newly listed on the Catalyst
on 27 June 2012. This section also allows to download docu-
On the site m.orlen.pl Internet users have also an opportunity
ments relating to bonds issue (information memorandum and
to check the wholesale fuel prices, review the list of current bids
information note) and enables to watch a broadcast of the bonds
and search for the brand petrol stations in the selected locations.
debut on Catalyst,
Via the mobile devices one can also listen to the business audio-
» a section containing a set of financial results materials was
book about the history of Polish oil industry or reach for electronic
complemented with a link to the Company’s press webcasts
publications. In the Press centre tab the audio files with the records
organized while publishing financial results,
from the press conferences are available, which do not overload
» on the home page of Investor relations section, link to publi-
the links and enable fast access to contents presented by PLN ORLEN.
cations, industry reports of which the Company is the author
or co-author, was added.
Platform m.orlen.pl is available in Polish and English version.
On the website, in the investor relations section, there is also a tab
Having shareholders, investors and stock market analysts who mainly
concerning the corporate governance. One can find there the Com-
use mobile devices in mind, the Company also launched in 2012
pany’s annual reports on complying with best practice rules and
a mobile version of the Annual Report On-line service. Should be
the ‘Code of Best Practice for WSE Listed Companies’. There is also
emphasized, it is a form of an internet service and not an applica-
brief information on best practice applied by the Company, the rules
tion thus it does not require any software updates.
for selecting an entity authorized to audit the financial statements
as well as information about the participation of women and men
in the Company’s Management Board and the Supervisory Board
DIRECT CONTACTS WITH CAPITAL
MARKET REPRESENTATIVES
in the last two years.
On a regular basis the Company actively participates in the meetings
The General Meeting tab in the Investor relations section contains
with investors and analysts both in Poland and abroad. Conferences,
the set of corporate documents and a guide for shareholders
individual and group meetings, and teleconferences are organized with
‘How to participate in General Meeting of PKN ORLEN’, updated
stakeholders on the capital market. The Company’s representatives
97
regularly realise also the roadshows – series of meetings with investors
issues in the history of the Polish market. 7-year maturity date was
at their work place, in-country and abroad. For the capital market
the longest among issues addressed to non-banking investors,
representatives interested in the Company’s operations also the so-
» taking part in an educational campaign ‘Akcjonariat Obywatelski.
called site visits are organized, i.e. visits of shareholders or analysts
Inwestuj Świadomie’ (‘Citizens Shareholders. Invest knowingly.’)
in the production plant and other trade and production activity places
dedicated to individual stock investors.
which allow them to better acquaint with the Company specifics.
The care for communication with the capital market players was
During the meetings the representatives of PKN ORLEN provide in-
appreciated also in 2012 and reflected through the awards granted
formation about the Company, however, it is also an occasion to get
to the Company in the area of investor relations:
feedback from the shareholders, investors or stock exchange analysts.
» special award for keeping the investor relation section using modern
Thanks to this feedback the Company, being aware of the informa-
methods of internet communications in the 5th edition of ‘Złota
tion needs of its recipients, can develop and improve its relations
Strona Emitenta’ (‘Golden Website’) organized by the Polish
with the capital market.
Association of Listed Companies,
» award nomination for ‘Golden Website’ in Polish listed compaThe Company is striving to broaden and diversify its investors base.
Thus, it undertakes activities aimed at active promotion of its business activity amongst prospective shareholders, also in new financial
centers worldwide.
nies belonging to WIG20 and mWIG40 category, in 5th edition
of the competition,
» In 2012 PKN ORLEN maintained its presence in 4th and 5th edition
of Respect Index project.
» PKN ORLEN was ranked among the top three best reporting
With a view to develop the forms and quality of communication with
of non-financial data listed companies among Polish companies
the capital market, the Company published in 2012 on a quarterly
belonging to WIG20 and mWIG40 and the group of companies
basis the so-called ‘trading statement’, i.e. operational and financial
in the energy sector – ranking organized by the Polish Association
estimates and expectations of operating profit (EBIT) trends, taking
into account the impact of macroeconomic factors and significant
one-offs on the operating profit (EBIT). Purpose of these reports
was to provide capital market participants with information about
the estimated ORLEN Group financial results in the period between
of Listed Companies, GES and Accreo Taxand,
» ‘Best Annual Report 2011’ award, in the competition organized
by the Institute of Accounting and Taxation,
» award nomination for ‘Best investor relations by a Polish Company
2012’ – IR Magazine.
end of the quarter and publication of the interim report for the pepublication of ‘trading statement’.
The Company’s reaction to appearing public opinions
and information injuring its reputation
Due to the fact that the Company has speeded up the publishing
In PKN ORLEN, there is an internal regulation in force, concerning
dates of financial statements, trading statement does no longer
the rules of taking actions which create the image of the Company
significantly play its role.
and contacts with the media representatives as well as passing
riod. In February 2013, the Company resigned from continuing
the information, relevant for the PKN ORLEN’s image, to the CorpoThe important actions carried out for the broad group of investors
rate Communication Department’s Director. This regulation obliges
by the Company in the last year included i.a.:
to multistage verification of information concerning the company
» organizing an open educational debate on the Warsaw Stock
and its representatives before it’s made public.
Exchange dedicated to building issuer creditability and alternative
forms of financing in time of economic crisis,
98
The above instruction regulates also the rules of reaction in a situ-
» issue of corporate bonds amounting to PLN 1 billion in February
ation, when opinions and information expressed in public by third
2012. These bonds were the highest in value among listed in 2012
parties may harm the Company’s reputation. The person responsible
on the Catalyst. In addition the issue was one of the highest bond
for the coordination of this process is the Director of the Corporate
Communication Department. As such opinions and information
appears, the Company verifies their reliability, evaluates the importance and then decides about issuing a disclaimer or closing the case
because of the PKN ORLEN’s interest or low impact of the occurred
DESCRIPTION OF KEY FEATURES
OF PKN ORLEN’S INTERNAL AUDIT
AND RISK MANAGEMENT SYSTEMS RELATED
TO THE PROCESS OF FINANCIAL REPORTING
misstatements. In case information as well as opinion presented by
a third party has serious influence the Company prepares a disclaimer
The Company’s system of internal control and risk management
in order to clarify false information or opinion.
in the process of financial statements preparation is implemented
through:
Depending on the nature of the matter, the prepared disclaimer
» verification whether a uniform accounting policy is applied by
is sent to the institution which delivered the information, harm-
the ORLEN Group companies as regards the recognition, measure-
ful for PKN ORLEN, and/or is posted on the corporate website
ment and disclosures in accordance with the International Financial
http://www.orlen.pl/EN/ in the Press Centre tab or is distributed
in form of press release.
Reporting on PKN ORLEN’s activity in the corporate
social responsibility area
Reporting Standards (IFRS) as adopted by the European Union,
» following accounting standards and monitoring compliance with them,
» following uniform separate and consolidated financial reporting
standards and periodic verification whether these standards are
properly applied in the ORLEN Group companies,
» verification of the ORLEN Group companies’ financial reports
PKN ORLEN recognises its role in the country’s economy. Size
compliance with the data placed into integrated IT system used
of the Company, awareness of operating in the energy sector
to prepare the ORLEN Group’s consolidated financial statements,
as well as traditions of responsible acting make a corporate citi-
» a review, by an independent auditor, of the published financial
zenship model to be translated into specific projects, functioning,
statements for the 1st quarter, the half-year and the 3rd quarter
operating philosophy with exceptional care.
of the year and the audit of the annual financial statements
of PKN ORLEN and the ORLEN Group,
Corporate social responsibility report (CSR) is an important part
of the communication with stakeholders. The extension of the Company’s reporting by environmental and social areas allows to inform
about conducted operations in fair and comprehensive way. Range
» procedures to authorise and give opinions about financial statements before they are published,
» carrying out an independent and objective evaluation of risk
management and internal control systems.
of reported by PKN ORLEN indicators was developed over the years,
both inside the Company (internal workshops, opinions of people
Records of economic events in PKN ORLEN is conducted in an
responsible for reporting process) and as well as by opinions of other
integrated system of financial – accounting, which configuration
stakeholders.
is compatible with the Company’s accounting policy.
In 2012 PKN ORLEN published the eight corporate social responsibil-
This system is the leading system in the ORLEN Group. Thanks
ity report and the fourth one prepared in accordance with the GRI
to a uniform IT platform used, the Parent Company has control over
(Global Reporting Initiative) standard. The Report was prepared
the recording of financial – accounting events within the ORLEN Group.
in accordance with GRI G3.1 Guidelines at B level.
The system has an option enabling the control of access rights
All corporate social responsibility reports are disclosed on Company’s
of different users in a way that ensures the control over their access
website: http://www.orlen.pl/EN/CSR/Reports/Pages/default.aspx.
to specific objects and transactions.
All actions performed in the system are recorded for individual transactions and users. In order to protect against unauthorized access,
the entire system, along with the user data, is stored in a special
directory structure of the operating system, which is secured with
the appropriate access rights.
99
Security and availability of information contained in the financial-
Designated users of the system supervise the safety management
accounting system are controlled at all levels of the database,
of the system and established stages of consolidation process
applications and presentations as well as at the level of operating
management. Granting access rights to individual users is strictly
system. System integration is ensured by the data entry control sys-
dependent on the security roles defined for (assigned to) them.
tems (validation, authorization, a list of values) and logs of changes.
Appropriate security classes have been set up for individual users
In case of system failure not completed transactions are withdrawn.
in order to maintain control. Access to financial resources is limited
Logs of changes give the possibility of path reviews.
by a system of permissions that are granted to authorized personnel only within the performance of their duties. These authoriza-
Users do not have direct access to the operating system and database.
tions are subject to regular audits and verification. Controlling
Integrated menu of the system includes access paths to all trans-
of the access to applications is carried out at each stage of prepara-
actions available in the system. Securing the access to individual
tion of the financial statement. Starting from data entry and ending
transactions is based on the authorizations assigned to the user.
with the generating of the final information.
Security systems are used at the hardware and software level
Financial information is stored in an IT system, so that they can be
of the system.
used to create transparent reports and forecasts, both for internal
needs and external recipients, such as public bodies, financial ana-
In order to ensure that unified accounting standards are applied,
lysts, shareholders and business partners.
the ORLEN Group companies have to follow, for the purpose of preparing the consolidated financial statements, the accounting policy
The preparation of consolidated financial statements in a single
adopted by ORLEN Group. It is periodically updated to ensure that
integrated tool enables to shorten the processes of consolidation and
it complies with the applicable laws, specifically with the IFRS,
reporting of financial information as well as to obtain high-quality
the Accounting Act dated 29 September 1994 and the Ministry
substantive and usable financial information.
of Finance Regulation dated 19 February 2009 on current and periodic information provided by issuers of securities. The Corporate
In order to reduce on a current basis the risks relating to the process
Accounting Office monitors whether this obligation is fulfilled and
of the financial statements preparation, they are quarterly verified
conducts comprehensive analytical procedures supplemented with
by an auditor, i.e. more often than required under the applicable
control activities, as well as develops instructions and guidelines
law. The financial statements for the 1st quarter, the half-year and
on identified issues that require detailed explanations to ensure
the 3rd quarter of the year are reviewed by the auditor, whereas
proper and uniform financial reporting principles.
the annual financial statement is subjected to audit. The auditor
presents the results of the reviews and audits to the Management
The consolidated financial statements are prepared based on the in-
Board and the Audit Committee of the Supervisory Board.
tegrated IT system where consolidation process of entered data
from reporting packages provided by the ORLEN Group companies
The Company has certain procedures to authorise the financial state-
is performed. The system is designed for financial management and
ments under which the periodical reports are submitted to the Man-
reporting purposes. The system enables the unification of financial
agement Board and, subsequently, forwarded to the Audit Committee
information. Results, budgeted and forecasted data, as well as sta-
of the Supervisory Board for their opinion. Once the opinion has
tistics are gathered in one place, what ensures direct control and
been obtained from the Audit Committee and once the auditor has
compatibility of the entered data.
ended its review or audit, the financial statements are approved
by the Management Board for publication and subsequently forwarded
100
The data is reviewed in terms of their cohesion, completeness
by the Investor Relations Office to the appropriate capital market
and continuity, which is achieved thanks to controls implemented
institutions and public opinion. Before the publication, the financial
in the system, which check the compliance of data entered by
statements are provided solely to persons involved in the prepara-
the companies.
tion, verification and approval process.
The Company has an Audit and Corporate Risk Management
Beginning from 1999 and for the entire 2012 year the shares
Department which has to ensure an independent and objective
of PKN ORLEN were also quoted on the London Stock Exchange
evaluation of the risk management and internal audit systems,
in the form of Global Depositary Receipts (GDRs). GDRs were removed
and analyze business processes. The Department operates basing
from listing on the official market and delisted from Main London
on the annual audit plans approved by the Management Board
Stock Exchange Market on 27 February 2013. Depositary receipts
and accepted by the Audit Committee of the Supervisory Board
were also traded in the United States on the OTC (Over The Counter)
and the Supervisory Board. The Audit and Corporate Risk Manage-
market up to 4 March 2013. The depositary of the PKN ORLEN’s
ment Department can also carry out random audits as ordered by
depositary receipts was The Bank of New York Mellon. On the Lon-
the Company’s Supervisory Board or the Management Board.
don Stock Exchange the traded unit was 1 GDR, which represented
2 PKN ORLEN’s shares.
Within the realised tasks and objectives, the Audit and Corporate
Risk Management Department provides recommendations as to
In 2012, PKN ORLEN decided to terminate the program of depositary
the implementation of solutions and standards designed to mitigate
receipts because of the decreasing investors interest in those securities.
the risk of PKN ORLEN not meeting the targets set, to improve the effectiveness of the internal control system and to increase the efficiency
On 29 November 2012 the Company sent to The Bank of New York
of business processes. Additionally the Audit Department monitors
Mellon termination of depositary agreements constituting the GDRs
the implementation of its own recommendations as well as those
and the Company’s American depositary receipts (ADRs).
given by the auditor as to the Company’s financial statements.
Termination of depositary agreement constituting the GDRs took
Twice a year the Audit and Corporate Risk Management Depart-
place on 27 February 2013 and the agreement constituting the ADRs
ment prepares a report for the Management Board and the Audit
on 4 March 2013.
Committee of the Supervisory Board on the recommendations
monitoring, which summarises the conclusions regarding the audit
The share capital of PKN ORLEN is divided into 427,709,061 ordinary
tasks performed, identified risks and information about the imple-
bearer shares with a par value of PLN 1.25 each.
mentation status of the recommendations given.
The ownership rights of PKN ORLEN’s shares are fully transferable.
SPECIFICATION OF CORPORATE GOVERNANCE
RULES WHICH PKN ORLEN DOES
NOT APPLY AND ITS EXPLANATION
Presented below is the list of PKN ORLEN’s shareholders possessing
significant stakes with the number of shares held by these entities,
their percentage share in the share capital of the Company, the num-
In 2012 PKN ORLEN applied all compulsory Corporate Governance
ber of votes resulting therefrom and their percentage of the total
rules included in ‘Best Practice for WSE Listed Companies’.
number of votes at the PKN ORLEN General Meeting.
PKN ORLEN’S SHAREHOLDERS
WITH A SIGNIFICANT STAKE
In 2012 and until the date of authorization of this report, there
was one change in the structure of shareholders with a stake
of more than 5% in the Company’s share capital. On 30 March
PKN ORLEN’s shares are listed on the main market of the Warsaw
2012 the Company was informed that ING Open Retirement Fund
Stock Exchange in the continuous trading system and are included
(ING OFE) became the owner of more than 5% of the total number
in the biggest company indexes WIG20 and WIG as well as the indu
of votes at a General Meeting of PKN ORLEN as a result of the PKN
stry index WIG-PALIWA. Since 19 November 2009 PKN ORLEN
ORLEN’s shares acquisition in transactions on the Warsaw Stock
shares are quoted among the companies engaged in corporate
Exchange, settled on 27 March 2012.
social responsibility Respect Index.
101
Before the acquisition of shares of the Company, the Fund owned
21,214,198 shares of PKN ORLEN representing 4.96% of share
capital and entitled to 21,214,198 of votes at the General Meeting
PKN ORLEN’S SHAREHOLDERS VESTED
WITH SPECIAL CONTROL RIGHTS
AND VOTING RIGHT RESTRICTIONS
of PKN ORLEN, what constituted 4.96 % of the total number of votes.
One PKN ORLEN share confers the right to one vote at the ComAs at 30 March 2012, the Fund owned 21,464,398 shares of PKN
pany’s General Meeting.
ORLEN representing 5.02% of share capital. The shares of PKN ORLEN
owned by the Fund entitled to 21,464,398 of votes at the Gen-
As regards the voting right of particular shareholders, the Articles
eral Meeting of PKN ORLEN, what constitute 5.02 % of the total
of Association state as follows:
number of votes.
» The voting right of the Company’s shareholders is restricted
to the extent that at the General Meeting of Shareholders none
of them can exercise more than 10% of the total votes existing
in the Company as at the date the General Meeting of Shareholders is held, provided that such a restriction of the voting
right does not apply for the purpose of determining the duties
of acquirers of significant stakes in accordance with:
– Competition and Consumer Protection Act of 16 February
2007,
– Accounting Act of 29 September 1994,
Shareholding structure of PKN ORLEN as at 1 January 2012
Shareholders
Number
of shares
Number
of votes
at a general
meeting
of PKN ORLEN
Share in total
number of votes
at ageneral
meeting
of PKN ORLEN
Share
in share capital
of PKN ORLEN
State Treasury
117,710,196
117,710,196
27.52%
27.52%
21,744,036
21,744,036
5.08%
5.08%
Others
Aviva OFE *
288,254,829
288,254,829
67.40%
67.40%
Total
427,709,061
427,709,061
100.00%
100.00%
Shareholders
Number
of shares
Number
of votes
at a general
meeting
of PKN ORLEN
Share in total
number of votes
at ageneral
meeting
of PKN ORLEN
Share
in share capital
of PKN ORLEN
State Treasury
117,710,196
117,710,196
27.52%
27.52%
Aviva OFE *
21,744,036
21,744,036
5.08%
5.08%
ING OFE **
21,464,398
21,464,398
5.02%
5.02%
Others
266,790,431
266,790,431
62.38%
62.38%
Total
427,709,061
427,709,061
100.00%
100.00%
* According to the information received by the Company from the Fund on 9 February 2010
Shareholding structure of PKN ORLEN as at 31 December 2012
* According to the information received by the Company from the Fund on 9 February 2010
** According to the information received by the Company from the Fund on 30 March 2012
102
– Act of 22 September 2006 on Transparency of Financial Relations
at the General Meeting exceeds 10% of the total num-
between Public Authorities and Public Entrepreneurs and
ber of votes in the Company, the number of votes held
on Financial Transparency of Certain Entrepreneurs,
by the remaining shareholders in the Grouping is subject
– Act of 29 July 2005 on Public Offering and Terms for Intro-
to further reduction. The number of votes is further reduced
ducing Financial Instruments to the Organised Trading System
in the order established on the basis of the number of votes
and Public Companies.
held by particular shareholders in the Shareholders Grouping
(from the highest to the lowest one). The number of votes
The restriction does not apply to the State Treasury and the de-
is being further reduced until the aggregate number of votes
pository bank which issued depositary receipts in connection with
held by the Shareholders Grouping does not exceed 10%
the Company’s shares under the agreement with the Company (in case
of the overall number of votes in the Company,
the bank exercises the voting right from the Company’s shares).
– in each case, the shareholder whose voting right has been
The voting right exercised by the subsidiary is deemed to be exercised
restricted, preserves the right to exercise at least one vote,
by the parent company within the meaning of the above mentioned
– restriction of the voting right also applies to the shareholder
acts. In order to calculate the number of votes held by a shareholder,
absent during the General Meeting,
the voting rights from the shares is added to the number of votes
that the particular shareholder would acquire in the event of converting the held depositary receipts into shares.
» In order to establish the basis for the votes being cumulated and
reduced in accordance with the above provisions, the Company’s
shareholder, the Management Board, the Supervisory Board and
» A shareholder is deemed to be each person, including the parent
individual members of such bodies may request the Company’s
company and its subsidiary, that is directly or indirectly entitled
shareholder to provide information on whether a person is the par-
to the voting right at the General Meeting under any legal title;
ent company or the subsidiary of PKN ORLEN.
that refers also to a person that is not a Company’s shareholder,
in particular a user, pledgee, a person authorised from the de-
The power referred to above includes also the right to request
positary receipt within the meaning of the Act of 29 July 2005
the disclosure of the number of votes held by the Company’s
on Trading in Financial Instruments as well as a person authorised
shareholder individually or together with other Company share-
to participate in the General Meeting despite having the held
holders. The person that failed to perform or performed unduly
shares been disposed of following the day when the right to par-
the obligation to provide the information referred to in this point,
ticipate in the General Meeting was established.
may exercise the voting right from one share exclusively until
the breach of such obligation has been remedied and exercising
» Shareholders, whose votes are cumulated and reduced, are jointly
the voting right by such person from other shares is ineffective.
referred to as the Shareholders Grouping. The cumulation of votes
involves summing up the votes held by individual shareholders
» The restriction of the voting right, which is referred to above,
of the Shareholders Grouping. The reduction of the number
does not apply to entities dependent on the State Treasury.
of votes involves decreasing the overall number of the entitled
votes in the Company during the General Meeting to the share-
» For the purpose of the regulations indicated above, the parent
holders being members of the Shareholders Grouping. The number
company and the subsidiary shall accordingly mean a person:
of votes is reduced in accordance with the following rules:
– who has the status of the dominant entity, dependent entity
– the number of votes of a shareholder who has the largest
number of votes in the Company among the votes of all
or both within the meaning of the Act of 16 February 2007
on Competition and Consumers Protection, or
shareholders in the Shareholders Grouping, is decreased by
– who has the status of the parent company, senior parent com-
the number of votes equal to the surplus in excess of 10%
pany, subsidiary, lower level subsidiary, jointly controlled entity
of the overall number of votes in the Company held in ag-
or of both parent company (including senior parent company)
gregate by all shareholders in the Grouping,
and subsidiary (including the lower level subsidiary and jointly
– if, despite the reduction mentioned above, the overall number
of votes held by the Shareholders Grouping to be exercised
controlled entity) within the meaning of the Accounting Act
of 29 September 1994, or
103
– who exerts (parent company) or is subject to (subsidiary)
regarding the disposal of assets disclosed in the uniform list of facili-
significant influence within the meaning of the Act of 22 Sep-
ties, installations, appliances and services comprised in the critical
tember 2006 on Transparency of Financial Relations between
infrastructure, referred to in article 5b item 7 point 1 of the Act
Public Authorities and Public Entrepreneurs and on Financial
of 26 April 2007 on Crisis Management, which pose a real threat
Transparency of Certain Entrepreneurs, or
to the functioning, business continuity and integrity of the critical
– whose votes from the Company’s shares held directly or indirectly
infrastructure. The Minister in charge of the State Treasury may also
are cumulated with the votes of another person or other
object to the Company’s body passing resolution on:
persons under the rules stipulated in the Act of 29 July 2005
on Public Offering and Conditions for Introducing Financial
» dissolution of the Company,
» change of function or ceasing of the exploitation of the Com-
Instruments to the Organised Trading System and Public
pany’s asset disclosed in the uniform list of facilities, installations,
Companies, in connection with holding, selling or purchasing
appliances and services comprised in the critical infrastructure,
Company substantial shareholdings.
referred to in article 5b item 7 point 1 of the Act of 26 April
2007 on Crisis Management,
» In the event of doubts, the provisions of this chapter should
be interpreted in accordance with Article 65 § 2 of the Polish
Civil Code.
» change of the Company’s business activity,
» disposal or lease of the Company’s enterprise or its organized
part or establishment of a limited property right,
» adoption of the operational and financial plan, investment activity
The State Treasury is authorised to appoint and revoke one of the Su-
plan or long-term strategic plan,
pervisory Board members. Moreover, one of the PKN ORLEN Manage-
» moving the Company’s seat abroad.
ment Board members are appointed and revoked by the Supervisory
Board at the request of the Minister in charge of State Treasury.
provided that such a resolution, if performed, would actually pose
a real threat to the operations, business continuity and integrity
According to the Company’s Articles of Association, State Treasury
of the critical infrastructure.
was entitled to specific rights up to half of 2012. These gave a possibility to establish an Observer in the Company that was allowed
In accordance with the 18 March 2010 Act on Specific Rights Vested
to monitor the Company’s operations as well as to participate
In the Minister In Charge of State Treasury , the Company’s Man-
in the Company’s meetings and review its documents. Records
agement Board, in agreement with the Minister in charge of State
of the Articles of Association relating to the Observer were deleted
Treasury and the Director of the Government Centre for Security
by the General Meeting resolution on 30 May 2012 and thereafter
is authorized to appoint and revoke a proxy in charge of the protection
registered in the National Court Register on 25 June 2012 as a change
of the critical infrastructure in the Company. The scope of proxy’s
in the Articles of Association.
tasks includes providing the Minister in charge of State Treasury
with the information on the Company’s authorities (i.e. the General
In addition, special rights for the shareholder in person of the State
Meeting, the Supervisory Board, the Management Board) having
Treasury can be a result of the commonly applicable provisions of law.
undertaken the above specified legal actions, providing the informa-
Such rights in particular result from the Act of 18 March 2010
tion on the critical infrastructure to the Director of the Government
on specific rights vested in the Minister in charge of State Treasury
Centre for Security on request, transferring and collecting informa-
and the exercise of such powers in certain capital companies or capital
tion on any threats to the critical infrastructure in cooperation with
groups conducting business activities in the electricity, crude oil and
the Director of the Government Centre for Security.
gas fuel sectors (the 18 March 2010 Act on ‘Specific Rights Vested
In the Minister in Charge of State Treasury’). Pursuant to the above
On 2 August 2011 the Management Board of PKN ORLEN appointed
act, the Minister in charge of State Treasury may object against
a Proxy for the critical infrastructure protection.
the resolution passed by the Company’s Management Board or any
other legal action undertaken by the Company’s Management Board
104
RULES FOR AMENDING PKN ORLEN’S
ARTICLES OF ASSOCIATION
The Supervisory Board may convene the Extraordinary General Meeting if the Supervisory Board recognises that it is advisable to do so.
The Supervisory Board may also convene the Extraordinary General
Any amendment to PKN ORLEN’s Articles of Association requires
Meeting if the Management Board fails to do so within two weeks
a resolution of the General Meeting of Shareholders and has
following the submission of the relevant request by the Supervisory
to be entered in the companies register. The resolution of the Gen-
Board. The Extraordinary General Meeting may also be convened by
eral Meeting of Shareholders to amend the Company’s Articles
the shareholders representing at least one half of the share capital
of Association is adopted by three quarters of votes. The General
or at least one half of the overall number of votes in the Company.
Meeting may authorise the Supervisory Board to formulate the uniform
text of the Articles of Association or make other editorial changes
The shareholder or shareholders representing no less than one
as set out in the resolution passed by the General Meeting.
twentieth of the Company’s share capital may request that specific
issues be placed on the agenda of the nearest General Meeting
Once the amendments to the Articles of Association are entered
under the rules of the generally applicable provisions of law.
in the companies register, PKN ORLEN publishes a relevant current report.
All the materials to be presented to the shareholders at the General
PROCEEDINGS OF PKN ORLEN’S GENERAL
MEETING OF SHAREHOLDERS,
ITS KEY POWERS, AND SHAREHOLDERS’
RIGHTS AND THEIR EXERCISE
Meeting, specifically draft resolutions to be adopted by the General Meeting and other important materials are made available by
the Company following the day when the General Meeting has
been convened in the Company’s seat in Płock and in the Warsaw
office, as well as on the corporate website www.orlen.pl.
Proceedings and powers of PKN ORLEN’s General Meeting of Shareholders are regulated in the Articles of Association and the Regula-
The General Meetings of PKN ORLEN are held in the Company’s
tions of PKN ORLEN’s General Meeting. The documents can be found
seat in Plock, however, they can also be held in Warsaw.
on the PKN ORLEN’s website: www.orlen.pl in the Company and
Investor relations sections in the General Meeting tab.
The Company arranges for an internet broadcast of the Meeting
and offers simultaneous translation into English.
CONVENING AND CALLING OFF PKN ORLEN’S
GENERAL MEETINGS
In accordance with the General Meeting Regulations the cancellation and the change in the date of the General Meeting should be
The General Meeting is convened through placing an announce-
effected forthwith once the requirement for the cancellation and
ment on the Company’s website and by delivering a current report
the change in the date has occurred but no later than seven days
to the capital market institutions and public information. The annou
prior to the day when the General Meeting is to be held. If the can-
ncement should be placed at least 26 days before the scheduled
cellation or change in the date of the General Meeting cannot
date of the General Meeting.
be effected within the deadline specified above, such a General
Meeting should be held. If it is impossible or excessively hindered
The Ordinary General Meeting of Shareholders should be held
to hold such a meeting due to the circumstances, the cancellation
no later than within six months from the end of every financial year.
and change in the date of the General Meeting may be effected
at any time prior to the day when the General Meeting is to be held.
The Extraordinary General Meeting of Shareholders is convened
The cancellation and the change in the date of the General Meet-
by the Management Board on its own initiative, on the motion
ing is effected by announcement placed on the Company’s website
of the Supervisory Board or on the motion of a shareholder or share-
together with the reasons and complying with other legal require-
holders representing no less than one twentieth of the Company’s
ments. Only the body or the person to have convened the General
share capital, within two weeks from filing the motion. The mo-
Meeting is competent to cancel the same. The General Meeting
tion to convene the General Meeting should specify the issues for
with the agenda containing specific issues put therein at the request
the agenda or include draft resolution on the proposed agenda.
of eligible entities, or which was convened at such a request, may
be cancelled only with consent of such requesting entities.
105
COMPETENCE OF PKN ORLEN’S
GENERAL MEETING
VOTING AT PKN ORLEN’S GENERAL
MEETINGS
The General Meeting of Shareholders is especially authorised to:
Unless stated otherwise in the Commercial Companies Code and
» consider and approve the Company’s annual financial state-
the Articles of Association, resolutions of the General Meeting
ments, the annual report on the Company’s business operations,
of Shareholders are passed with an absolute majority of votes cast,
the consolidated financial statements of the ORLEN Group and
while votes cast mean votes ‘for’, ‘against’ and ‘abstain’.
the report on the ORLEN Group business operations for the previous financial year,
» acknowledge the fulfilment of duties by the Supervisory Board
and Management Board members,
Resolutions of the General Meeting of Shareholders regarding preferred shares and the Company’s merger as a result of all the Company’s assets being transferred to another company, dissolution
» decide on the allocation of profit and the cover of losses as well
of the Company (including dissolution as a result of the Company’s
as on the use of funds set up from profit, subject to special
seat or main plant being transferred abroad), liquidation of the Com-
regulations which provide for a different way of their usage,
pany, its restructuring and decrease in the share capital by redemption
» appoint the Supervisory Board members, subject to the provi-
of some shares without the capital being simultaneously increased
sions of § 8 item 2 of the Articles of Association, and establish
are passed with a majority of 90% of votes cast.
principles for their remuneration,
» increase and decrease the share capital unless otherwise stated
The General Meeting’s resolution to renounce the examination of an
in the Commercial Code and the Company’s Articles of Association,
issue placed on the agenda may be adopted only in case when
» decide on claims for the rectification of damage caused when
there are substantial reasons to do so. The resolutions to remove
setting up the Company or exercising supervision or management,
or not to consider an issue placed on the agenda on the motion
» approve the sale and lease of the company or its organised
of the shareholders requires the majority of 75% of votes cast provided
part and establish a limited property right on such enterprise
that the shareholders present at the General Meeting who requested
or an organised part thereof,
this issue be placed on the agenda previously agreed to the issue
» grant consent to the sale of real estate, perpetual usufruct or inte
being removed from the agenda or not to consider it at all.
rest in real estate which net book value exceeds one twentieth
of the Company’s share capital,
» amend the Company’s Articles of Association,
» set up and dissolve reserve capitals and other capitals and the Company’s funds,
» pass resolutions to redeem shares and buy shares to be redeemed
and to establish the redemption rules,
» issue convertible bonds or bonds with pre-emptive rights and
One PKN ORLEN share confers the right to one vote at the Company’s
General Meeting. The voting right of the Company’s shareholders
is restricted to the extent that at the General Meeting of Shareholders none of them (but for those specified in the Company’s
Articles of Association) can exercise more than 10% of the total
votes existing in the Company as at the date the General Meeting
of Shareholders is held.
issue warrants,
» pass resolutions on winding-up the Company, its dissolution,
liquidation, restructuring of the Company and merger with
The shareholders can participate in the General Meeting and exercise
their voting rights in person or by the proxy.
another company,
» conclude holding contracts within the meaning of article 7
of the Commercial Companies Code.
On 30 May 2012 during the Ordinary General Meeting, the Management Board willing to implement recommendations and principles of the ‘Best Practice for WSE Listed Companies’ proposed
106
Purchase of real estate, perpetual usufruct or interest in real estate,
to the shareholders of the Company the possibility to participate
regardless of its value, as well as disposal of real estate, perpetual
from 1 January 2013 in the General Meeting using the means
usufruct or interest in real estate where net book value does not
of electronic communication. Relevant provisions to the Articles
exceed one twentieth of the Company’s share capital does not re-
of Association were also proposed. Unfortunately, this proposal was
quire a consent resolution of the General Meeting of Shareholders.
rejected by the shareholders of the Company.
PARTICIPATION IN PKN ORLEN’S
GENERAL MEETINGS
The General Meeting may be attended by the members of the Management Board and the Supervisory Board, who can take the floor,
even if they are not shareholders, without any invitations being sent.
In accordance with the Commercial Companies Code, the right
An Ordinary General Meeting of Shareholders can be attended by
to participate in the Company’s General Meeting is vested only
the members of the Management Board and the Supervisory Board
in the persons that are the Company’s shareholders sixteen days before
whose mandates have expired before the date of the General Meet-
the date of the General Meeting (date of registration in the General
ing and who exercised their functions in the financial year for which
Meeting).
the Management Board report and the financial statements are
to be approved by the Ordinary General Meeting of Shareholders.
A shareholder who wants to take part in the General Meeting
of the Company must report it to the entity where the securities
General Meetings of Shareholders can also be attended by other
account is kept. At the request of the shareholder, filed no earlier
persons invited by an authority convening the General Meeting or
than the announcement of convening the General Meeting has
allowed to enter the meeting room by the Chairman, specifically,
been published and no later than on the working day following
certified auditors, legal and financial advisers or the Company’s
the day when the participation in the General Meeting has been
employees. PKN ORLEN under the applicable law and with due
registered, the entity where the securities account is kept issues
consideration of the Company’s interests allows media representatives
a personal certificate of entitlement to attend the General Meeting.
to attend the General Meetings. The Management Board ensures
This certificate includes:
that each General Meeting is attended by an independent expert
» the business name, seat, address and stamp of the issuer and
specialised in commercial law.
the certificate number,
» number of shares held (at the shareholder request part or all
Members of the Management Board and the Supervisory Board and
of the shares registered on the securities account should
the Company’s certified auditor provide the Meeting participants
be indicated),
with explanations and information about the Company, within
» type and code of shares,
» the business name, seat and address of the Company,
» nominal value of shares,
» name and surname or the business name of the shareholder,
» the seat (place of residence) and address of the shareholder,
» purpose of issuing the certificate,
» date and place of the certificate issuing,
» signature of the person authorised to issue the certificate.
the scope of their authorisation and to the extent required for the issues discussed by the General Meeting to be resolved. Questions
posed by the General Meeting participants are answered in view
of the fact that PKN ORLEN, as a public company, fulfils its reporting
obligations in a manner specified in the applicable capital market
regulations and the information cannot be provided otherwise than
in conformity with these regulations.
The shareholders of the Company may communicate with the Com-
On the basis of the personal certificates the entities where the se-
pany via the corporate website. This way shareholders can send an
curities accounts are kept prepare lists of shareholders eligible
electronic notice of proxy or proxy document allowing the identi-
to participate in the Company’s General Meeting. These lists are
fication of the principal and the proxy together with other related
submitted to the National Depository for Securities (Krajowy Depozyt
documentation. Special section dedicated to the Company’s General
Papierów Wartościowych S.A. ‘KDPW’, presently the entity maintaining
Meetings is used for this purpose. The section includes also useful
the securities deposit) no later than twelve days prior to the date
to the shareholders materials, among others, the guideline ‘How
of the General Meeting. Based on the lists, KDPW prepares a list
to participate in General Meeting’ updated in accordance with
of entities eligible to participate in the Company’s General Meeting,
changes that occur in the commonly applicable provisions of law,
and provides it to the Company no later than a week before the date
information about the planned shareholders’ meetings along with
of the General Meeting. The list is then used by the Company to iden-
materials relating to such meetings, archive materials from the meet-
tify the shareholders eligible to participate in the General Meeting.
ings held, including texts of resolutions adopted and video files with
PKN ORLEN’s Management Board issues the list of shareholders
internet broadcasts of the General Meetings.
eligible to participate in the General Meeting in Płock and in Warsaw
office before three days prior to the date of the General Meeting.
107
GENERAL MEETINGS IN 2012
These above mentioned proposals prepared by the Management
Board were not approved by the General Meeting. Decisions per-
In 2012 two General Meetings of PKN ORLEN were held:
mitting to hold the so called e-meeting were not introduced. Thus,
» on 12 January 2012 – the Extraordinary General Meeting
at the request of the Management Board, the issue regarding changes
of PKN ORLEN,
of the Rules of the General Meeting was removed from the agenda
» on 30 May 2012 – the Ordinary General Meeting of PKN ORLEN.
of the General Meeting.
The Extraordinary General Meeting of PKN ORLEN made changes
At the same time, on 30 May 2012 the Ordinary General Meeting
in the Supervisory Board. Mr Krzysztof Kołach was dismissed. Sub-
established the 8-member Supervisory Board and appointed Mr Paweł
sequently, the Extraordinary General Meeting decided to establish
Białek as a member of the Supervisory Board of PKN ORLEN.
9-member Supervisory Board and appointed Mr Michał Gołębiowski
as a member of the Supervisory Board.
During the Ordinary General Meeting the shareholders approved
the annual reports on the operations of the Company and the ORLEN
COMPOSITION AND PROCEEDINGS
OF THE MANAGEMENT AND SUPERVISORY
AUTHORITIES IN PKN ORLEN
AND THEIR COMMITTEES
Group as well as the financial statements for 2011. They also
decided on the fulfilment of duties by all the Supervisory and
Apart from generally applicable laws, the rules of conduct for PKN
the Management Boards members excluding the fulfilment of duties
ORLEN’s Supervisory Board, its Committees and the Management
by Mr Marek Serafin, in whose case the Ordinary General Meeting did
Board are regulated in PKN ORLEN’s Articles of Association and
not pass a resolution confirming his fulfilment of duties as a Member
the Supervisory Board and the Management Board Regulations,
of the Management Board.
respectively. The proceedings of the management and supervisory
authorities in PKN ORLEN are also subject to the corporate govern-
The General Meeting decided also to allocate the Company’s entire
ance principles set out by the Warsaw Stock Exchange.
profit generated in 2011 to the Company’s reserve capital.
The Management Board
The Ordinary General Meeting of PKN ORLEN adopted a resolution
to remove provisions relating to possibility of setting up the Observer
Composition of PKN ORLEN’s Management Board in 2012
in the Articles of Association and passed the resolution to establish
a uniform act of the Articles of Association.
As at 1 January 2012 the composition of the Management Board
of PKN ORLEN was as follows:
The Ordinary General Meeting debated on the amendments to the PKN
ORLEN’s Articles of Association in order to implement the provisions
that enable the shareholders to participate in the General Meeting
with the use of electronic communication means, which includes:
» broadcast of the General Meetings,
» two-way communication in real-time within which shareholders
Composition of the PKN ORLEN’s Management Board
as at 1 January 2012
Name and surname
may speak during the General Meeting, being in a different place
than where the Meeting is held,
» voting in person or by a Proxy.
108
Sławomir Jędrzejczyk
Grażyna Piotrowska-Oliwa
Position held in PKN ORLEN
Management Board
President of the Management
Board, Chief Executive Officer
Vice – President
of the Management Board,
Member of the Management
Board, Sales
Krystian Pater
Board, Refinery
Piotr Wielowieyski
Member of the Supervisory
Board delegated to act
temporarily a Member
Petrochemistry
In March 2012 there were changes in the composition of the Management Board. The Supervisory Board of PKN ORLEN appointed
Division of powers of the Company’s
Management Board
Mr Piotr Chełmiński at its meeting on 6 March 2012 as Member
of the Management Board responsible for Petrochemistry, effective
Mr Dariusz Jacek Krawiec, President of the Management Board of PKN
10 March 2012. On 7 March 2012 Ms Grażyna Piotrowska-Oliwa,
ORLEN at the same time fulfilling the function of the Chief Executive
Member of the Management Board responsible for Sales resigned
Officer supervises the following areas: human resources, strategy and
from the position effective 18 March 2012 due to the appoint-
project management, purchases, Counsel to PKN ORLEN, market-
ment by the Supervisory Board of Polskie Górnictwo Naftowe
ing, corporate communication, audit, crude oil trading, upstream
i Gazownictwo S.A. (‘PGNIG’) as Chief Executive Officer of PGNIG.
as well as information protection, critical infrastructure and defence.
Then, the Supervisory Board of PKN ORLEN, on 14 March 2012,
appointed Mr Marek Podstawa as Member of the Management
Mr Sławomir Jędrzejczyk, Vice – President of the Management
Board responsible for Sales effective 19 March 2012.
Board, Chief Financial Officer supervises the following areas: planning and reporting, business controlling, supply chain management,
Until 31 December 2012 and the date of authorization of these
finance management, taxes, investor relations, capital investments
financial statement composition of the Management Board has
and divestments, IT.
not changed.
Mr Piotr Chełmiński, Member of the Management Board in charge
Composition of the PKN ORLEN’s Management Board
as at 31 December 2012
Name and surname
Piotr Chełmiński
of Petrochemistry supervises the following areas: petrochemical production, sale of petrochemical products, chemistry, health and safety,
Position held in PKN ORLEN
Management Board
President of the Management
Board, Chief Executive Officer
Vice – President
Board, Petrochemistry
Krystian Pater
Board, Refinery
Marek Podstawa
Board, Sales
environmental protection, development and efficiency, implementation
of property investments, energetics.
Mr Krystian Pater, Member of the Management Board in charge
of Refinery supervises the following areas: refining production, oil
production, energy production, investments and efficiency of refining production.
Mr Marek Podstawa, Member of the Management Board in charge
of Sales supervises the following areas: wholesale in refining products,
sale of oils, retail sale, and logistics.
Number of women and men acting as Management Board
The rules of PKN ORLEN’s Management
Board operations
Members in the last two years
Number of women and men acting as Management Board Members
of PKN ORLEN, including changes in composition of the reporting period
Number
of women
Number
of men
1 January 2011
0
5
30 June 2011
1
4
As at
9 December 2011
1
4
1 January 2012
1
4
10 March 2012
1
4
19 March 2012
0
5
31 December 2012
0
5
The PKN ORLEN Management Board’s principal objective is to realise
the Company’s interest, which is understood as building the value of its
assets entrusted by its shareholders, with due respect for the rights
and interests of the parties other than the shareholders, involved
in the Company operations, especially creditors and employees.
The Management Board of PKN ORLEN ensures transparency and
efficiency of the Company’s management system and guarantees
that the Company’s affairs will be handled in accordance with
the applicable law and good business practice.
109
Appointing and recalling PKN ORLEN’s
Management Board
The meeting of the Management Board is convened by the President,
who manages the activity of the Management Board and has to fix
the date, venue and the agenda of the meeting. In exceptional
The Management Board of PKN ORLEN consists of five to nine
cases the meeting of the Management Board may be convened
members, including the President, Vice-Presidents and other mem-
by the Vice-President or two members of the Management Board.
bers of the Management Board. Members of the Management
The meeting can also be held without being formally convened if all
Board are appointed and recalled by the Supervisory Board. One
the Management Board members are present and none of them
member of the Management Board is appointed and recalled
has objected to the meeting being held or any proposed issues
by the Supervisory Board upon the request of the Minister in charge
being put on the agenda.
of the State Treasury.
Invited Company employees, advisers and other persons can attend
The term of office of the Management Board members is a joint term
the meeting with the consent of the person chairing the meeting
of office, ending on the day when the Annual General Meeting has
of the Management Board. Additionally, in case of issues relating
been held, approving the financial statement for the whole second
the critical infrastructure components, a Proxy for the critical infra-
financial year of such term of office. So determined joint term of office
structure can take part as an advisor in the meeting of the Man-
is assumed to commence on 7 June 2008. At its meeting on 24 March
agement Board.
2011 the Supervisory Board appointed the Management Board of PKN
ORLEN for a joint three-year term. The new term of the Management
Meetings of the Management Board are held in the Company’s
Board started on 30 June 2011, i.e. after the holding of the Ordinary
seat in Płock or in the Company’s office in Warsaw. The person
General Meeting approving the financial statements for 2010.
convening the meeting may, however, determine another venue
for the meeting to be held.
The President, Vice-Presidents, and other members of the Management Board, or the entire Management Board, may be suspended
The Management Board adopts resolutions at the meetings. For
from duties for significant reasons by the Supervisory Board.
a resolution to be effective the scheduled meeting has to be notified to all the members of the Management Board and at least
Should the Management Board President be suspended from duty
one half of the Management Board members have to be present
or removed from office or his/her mandate expires before the end
at the meeting. The Management Board resolutions are passed
of the term of office, all his/her powers, except for the right to the vote
with a simple majority of votes (in the event of a voting deadlock,
cast referred to in § 9 item 5 point 2 of the Articles of Associa-
the President of the Management Board has the casting vote) pro-
tion, are to be executed by the person appointed by the resolution
vided that for resolutions to grant a procuration, unanimity of all
of the Supervisory Board acting as President of the Management
members of the Management Board is required. A Management
Board until the new Management Board President is appointed
Board member who voted against a resolution that was adopted
or the current one is restored to his/her position.
may communicate his/her dissenting opinion, however, such communication has to be provided with the reasoning.
Organisation of PKN ORLEN’s
Management Board activity
Resolutions are adopted in an open vote. A secret ballot may be
ordered at a request of each member of the Management Board.
Meetings of the Management Board are held when necessary, how-
Resolutions are signed by all members of the Management Board
ever, not less frequently than once every two weeks. Each member
who were present at the Management Board meeting on which
of the Management Board may request in writing for a Management
the resolution was adopted. The resolution is also signed by the mem-
Board meeting to be convened and/or certain issues to be placed
ber of the Management Board who filed a dissenting opinion, with
on the agenda. The request should contain the proposed agenda
a note: ‘dissenting opinion’ or ‘votum separatum’.
and the justification for the request. The meeting should be held
within seven days of the request being filed.
110
Competences of PKN ORLEN’s Management Board
» dispose of, purchase and encumber stakes, shares or other interest
in other entities, including shares admitted to public trading,
which are not reserved to be considered by other authorities
» issue the Company’s securities,
» approve the annual report on the Company’s business opera-
of the Company under the provisions of the Commercial Code or
tions, the Company’s annual, half-yearly and quarterly financial
the Articles of Association. All the members of the Management
statements, the ORLEN Group’s annual, half-yearly and quarterly
The Management Board has to handle all the affairs of PKN ORLEN
Board are obliged and authorised to handle the affairs of PKN ORLEN.
financial statements,
» adopt and change the Company’s employees’ remuneration
All the maters going beyond the ordinary course of business are
scheme, as well as decisions regarding introduction and funda-
subject to resolutions of the Management Board, however, the con-
mentals of the incentive schemes,
sent of the Management Board is not required to carry out an
» conclude, amend and terminate a collective labour agreement
activity being an integral part of another activity which has already
applicable in the Company, and other agreements with trade
been approved by the Management Board unless the resolution
of the Management Board provides otherwise. Activities falling
within the scope of the ordinary course of business are activities
related to fuels trading within the meaning of the Company’s Articles
of Association (i.e. crude oil, petroleum products, biocomponents,
biofuels and other fuels, including natural gas, industrial gas and
unions,
» establish the principles of granting and revoking powers of attorney,
» formulate the so-called donation policy of the Company,
» grant a procuration,
» establish the internal segregation of duties among the members
Board Regulations.
» set up establishments / offices abroad,
» handle other matters which at least one member of the Manage-
A resolution of the Management Board is required, among others, to:
» take decisions on the payment of interim dividends.
» adopt and amend the Management Board Regulations,
» adopt and amend the Organisational Rules and Regulations
The Management Board has to regularly provide the Supervisory
fuel gas) and any other activities not specified in the Management
ment Board requests to be handled in the form of a resolution,
of PKN ORLEN,
Board with exhaustive information on all aspects of PKN ORLEN’s
» adopt motions to be submitted to the Supervisory Board and
business operations and the risks related to such operations as well
/ or to the General Meeting of Shareholders, in particular, any
as the methods of managing such risks. Additionally, the Man-
motions sent to these bodies for their consent to perform certain
agement Board has to prepare and adopt annual and long-term
actions, issue opinions, make an assessment or give an approval,
financial plans and the Company development strategy in the form,
which are required in accordance with the generally applicable
to the extent and by the deadlines set by the Supervisory Board.
law and / or the Company’s Articles of Association,
The Management Board of PKN ORLEN has also to prepare and
» convene the General Meetings of Shareholders and adopt the proposed agenda of the General Meetings,
» approve annual and long-term financial plans as well as the Com-
submit to the Supervisory Board the annual financial statements
of PKN ORLEN and the annual financial statements of the ORLEN
Group for the previous financial year.
pany’s development strategy,
» approve investment tasks and corresponding liabilities if the resulting expenditures and encumbrances exceed PLN 10,000,000,
» incur liabilities, manage the property rights and any form of encumbrance on the Company’s property where the total value
exceeds PLN 20,000,000 (with certain exceptions to that rule),
» dispose and purchase real estate, perpetual usufruct or an interest
in real estate and to establish a limited property right,
111
SUPERVISORY BOARD
On 30 May 2012 the Ordinary General Meeting appointed Mr. Paweł
Białek to function as the Supervisory Board member.
Composition of PKN ORLEN’s Supervisory Board in 2012
Composition of PKN ORLEN’s Supervisory Board
as at 1 January 2012
Name and surname
Position held in PKN ORLEN’s
Supervisory Board
Maciej Mataczyński
Chairman of the Supervisory Board
Marek Karabuła
Vice – Chairman of the Supervisory
Board
Angelina Sarota
Secretary of the Supervisory Board
Grzegorz Borowiec
Artur Gabor
Independent member
of the Supervisory Board
Krzysztof Kołach
Independent member
Leszek Jerzy Pawłowicz
Independent member
statement composition of the Supervisory Board has not changed.
In 2012 the Supervisory Board held 12 meetings and adopted 81
resolutions.
Composition of the PKN ORLEN’s Supervisory Board
Name and surname
Supervisory Board
Maciej Mataczyński
Przewodniczący Rady Nadzorczej
Wiceprzewodniczący Rady
Nadzorczej, Niezależny Członek
Rady Nadzorczej
Angelina Sarota
Sekretarz Rady Nadzorczej
Cezary Banasiński
Niezależny Członek
Rady Nadzorczej
Grzegorz Borowiec
Członek Rady Nadzorczej
Artur Gabor
Niezależny Członek
Rady Nadzorczej
Michał Gołębiowski
Paweł Białek
Independent
Piotr Wielowieyski
Janusz Zieliński
member
Until 31 December 2012 and the date of authorisation of this financial
(in period from 9 December 2011 to 9
March 2012 – delegated to act as a Member
of the Management Board of PKN ORLEN)
Independent member
At the beginning of the 2012 changes in the composition of the Supervisory Board were made. On 12 January 2012 the Extraordinary
Number of women and men acting as Supervisory Board
General Meeting of PKN ORLEN revoked Mr Krzysztof Kołach from
Members of PKN ORLEN in the last two years.
the Supervisory Board. At the same time the Extraordinary General
Meeting appointed Mr Michał Gołębiowski to the Supervisory Board.
Number of women and men acting as Supervisory Board Members
of PKN ORLEN, including changes in its composition in the report-
Additionally, as of 11 January 2012, Minister of the State Treasury
ing period
based on § 8 item 2 point 1 of Articles of Association, acting
Number
of women
Number
of men
1 January 2011
1
8
1 January 2012
1
8
12 January 2012
1
8
29 March 2012
1
6
ski submitted statements on resignation from the position of PKN
30 May 2012
1
7
ORLEN’s Supervisory Board Member, effective from 28 March 2012.
31 December 2012
1
7
on behalf of the State Treasury – the shareholder, recalled Mr Janusz
Zieliński from his office of the Supervisory Board of PKN ORLEN.
Concurrently Minister of the State Treasury, as of 12 January 2012
appointed Mr Cezary Banasiński to the Supervisory Board.
Further changes in the composition of the Supervisory Board took
place in March 2012. Mr Marek Karabuła and Mr Piotr Wielowiey-
On 24 April 2012 the Supervisory Board appointed Mr Leszek Jerzy
Pawłowicz to act as Vice – Chairman of the Supervisory Board.
112
As at
The rules of conduct of PKN ORLEN’s
Supervisory Board
» he/she is not a shareholder holding 5% or more votes at the Com-
Appointing and recalling members of PKN ORLEN’s Supervisory
» he/she is not a member of supervisory or management au-
pany’s General Meeting of Shareholders or a Related Entity’s
General Meeting,
Board
thorities or an employee of an entity having 5% or more votes
at the Company’s General Meeting of Shareholders or a Related
Members of PKN ORLEN’s Supervisory Board are appointed for a joint
Entity’s General Meeting,
term of office, ending on the day when the Ordinary General Meet-
» he/she is not an ascendant, descendant, spouse, sibling, spouse’s
ing has been held, approving the financial statement for the whole
parent or any other person remaining in an adoptive relationship
second financial year of such term of office. Individual members
with any of the persons mentioned above,
of the Supervisory Board and the entire Supervisory Board can be
recalled at any time before the end of the term of office. The General
» he/she has not hold the position of the Company’s Supervisory
Board member for more than 3 terms of office,
Meeting of PKN ORLEN appoints the Chairman of the Supervisory
» he/she is not a member of the Management Board of the com-
Board, whereas the vice-chairman and the secretary are appointed by
pany, where a member of the Company’s Management Board
the Supervisory Board from amongst the other members of the Board.
holds the position of a member of the Supervisory Board,
» he/she is free from any significant connections with members
PKN ORLEN’s Supervisory Board is composed of six to nine members.
of the Company’s Management Board by participation in other
The State Treasury is authorised to appoint and recall one member
companies.
of the Supervisory Board, other members of the Supervisory Board
are appointed and recalled by the General Meeting of Sharehold-
Independent members of the Supervisory Board, before being ap-
ers. On 25 June 2010 the Annual General Meeting of PKN ORLEN
pointed to the Supervisory Board, should submit to the Company
appointed Supervisory Board Members to a new term of office.
a written statement confirming that they comply with the above
mentioned provisions. If the mentioned provisions are not met,
Pursuant to the Articles of Association of PKN ORLEN, at least two
a member of the Supervisory Board is obliged to immediately notify
members of the Supervisory Board have to comply with the follow-
the Company thereof. The Company informs the shareholders about
ing independency provisions (the so-called independent members
the current number of independent members of the Supervisory Board.
of the Supervisory Board):
» he/she is not an employee of the Company or a Related Entity,
» he/she has not been a member of management authorities
If the number of independent members of the Supervisory Board
of the Company or a Related Entity within the last five years
to immediately convene a General Meeting of Shareholders and put
prior to the appointment to the Supervisory Board,
an issue concerning changes in the composition of the Supervisory
» he/she is not a member of supervisory and management authorities of a Related Entity,
is less than two, the Company’s Management Board is obliged
Board on the agenda of the General Meeting. The Supervisory Board
acts in its current composition until the changes in the composition
» he/she does not receive nor has received, within the last five
of the Supervisory Board are made, i.e. the number of independent
years prior to the appointment to the Supervisory Board, a con-
members is adjusted to the statutory requirements set in the Articles
siderable additional remuneration, i.e. remuneration exceeding
of Association whereas the provisions of § 8 item 9a of the Articles
the aggregate amount of PLN 600,000 from the Company or
of Association (containing a list of resolutions which must be passed
a Related Entity, apart from the remuneration due to the member
with consent of at least one half of independent Supervisory Board
of supervisory authorities,
members) do not apply.
» he/she is not nor has been, within the last three years prior
to the appointment to the Supervisory Board, a partner or employee of the current or former chartered auditor examining
the financial statements of the Company or a Related Entity,
113
Organisation of PKN ORLEN’s Supervisory
Board’s operations
Passing resolutions on the following matters:
Meetings of the Supervisory Board are held when necessary, how-
» giving permission to sign any significant agreement by the Company
ever, not less frequently than once every two months. The meet-
or a subsidiary with an entity related to the Company, a member
ings are convened by the Chairman of the Supervisory Board.
of the Supervisory Board, or Management Board, as well as with
» any contribution to members of the Management Board provided
by the Company or any related entities,
In case of his absence or inability to act his role this task is ascribed
their related entities,
to the Vice – Chairman of the Supervisory Board, and respectively
» appointing a certified auditor to audit the financial statements
to Secretary of the Supervisory Board. Written invitations shall be
of the Company requires the consent of at least one half of the inde
sent to the Members of the Supervisory Board, at least seven days
pendent members of the Supervisory Board. Such provisions do not
before the date of the session.
exclude applying Article 15 § 1 and 2 of the Commercial Code.
Moreover, as stated in the Company’s Articles of Association, a Su-
With a view to fulfilling its duties, the Supervisory Board can review
pervisory Board meeting should be convened following a written
all the Company documents, demand reports and explanations
request of a shareholder or shareholders representing at least one
from the Management Board and the employees as well as inspect
tenth of the share capital, the Management Board or a member
the Company’s assets.
of the Supervisory Board. In such cases the session should be convened within two weeks from the receipt of such request and should
Competence of PKN ORLEN’s Supervisory Board
be held no later than within three weeks of such request being
received. If a Supervisory Board meeting is not convened within two
The Supervisory Board of PKN ORLEN exercises permanent supervision
weeks of the request being filed, the requestor can call the session
over the Company’s operations, in all fields of its activity, specifically,
by himself through a written notice specifying the time, venue and
the Supervisory Board is authorised to act as set out in the Commercial
the proposed agenda sent to the members of the Supervisory Board,
Code and the Company’s Articles of Association. The Supervisory
at least seven days before the date of the meeting.
Board takes relevant steps required to regularly obtain exhaustive
information from the Management Board about all the material
Meetings of the Supervisory Board can only take place when all its
issues relating to of PKN ORLEN’s operations and the risk related
members have been properly invited. Meetings can also be held
to the business operations and risk management methods applied.
without the meeting being formally convened if all the Supervisory
Board members are present and grant their consent to the session
Pursuant to the Articles of Association, the Supervisory Board is also
being held and to certain issues being put on the agenda.
authorised to:
» appoint and recall the President, Vice-Presidents and other members
The Supervisory Board can pass resolutions if at least half of its
of the Management Board (except for one member of the Man-
members participate in the meeting. Subject to the provisions
agement Board appointed and recalled by the Supervisory Board
of the Commercial Code, a resolution of the Supervisory Board can
at the request of the State Treasury until the State Treasury sells
be passed in writing or with the use of direct means of remote com-
the last Company share), represent the Company in contracts with
munication. Resolutions of the Supervisory Board are passed with
the Management Board, including the terms of their employment
an absolute majority of the votes cast, in the presence of at least
» suspend the activities of individual or all members of the Man-
mean votes ‘for’, ‘against’ and ‘abstain.’ This does not apply to any
agement Board for important reasons as well as delegating
members of the Management Board or the entire Management
a member or members of the Supervisory Board to temporarily
Board being recalled or suspended during the term of their office
perform the duties of those members of the Management Board
when at least two thirds of all the Supervisory Board members have
who are unable to perform their duties,
to vote in favour of the resolution.
114
contracts,
half of the members of the Supervisory Board, while the votes cast
» approve the Management Board Regulations,
» appoint an entity authorised to audit the financial statements
The Articles of Association also stipulate that the consent
of the Company and the consolidated financial statements
of PKN ORLEN’s Supervisory Board is required to:
of the ORLEN Group in accordance with the Accounting Act,
» assess the Company’s financial statement in terms of its accuracy
» set up a branch abroad,
» sell or encumber fixed assets which net book value exceed
both in terms of its compliance with the accounting books and
one twentieth of the asset value stated in the recent financial
documents, the factual status, assess the Management Board’s
statements approved by the General Meeting of Shareholders,
report on the Company’s business operations, as well as the Man-
as a result of one or several related legal actions being taken,
agement Board motions on the allocation of profit and coverage
» dispose of or encumber, in any way whatsoever, shares or stakes
of loss, and submit to the General Meeting of Shareholders an
in the following companies: Naftoport Sp. z o.o., Inowrocławskie
annual written report on the results of the above assessments,
Kopalnie Soli SA and in the company to be established with
» assess the financial statement of the ORLEN Group and the Man-
a view to transporting liquid fuels through pipelines,
agement Board’s report on the business operations of the ORLEN
» incur other liabilities exceeding the equivalent of one fifth
Group and submit the annual written report on the results of such
of the share capital, as a result of one or several related legal
assessment to the General Meeting,
actions being taken during the financial year, except for the fol-
» issue opinions on any matter submitted by the Management
Board to be presented either to Ordinary or Extraordinary General
Meeting of Shareholders,
» grant consent to the members of the Management Board to take
positions in supervisory or management authorities of other entities and to collect remuneration for such activities,
» grant consent to implement investment project and to incur
the related liabilities in case the expenses or charges due to such
activity exceed the equivalent of one half of the Company’s share
capital,
lowing:
– activities performed within the scope of ordinary management
activity, including in particular all activities relating to Fuels
trading,
– activities approved by the Supervisory Board in the annual
financial plans,
– activities which need the consent of the Shareholders Meeting
in order to be performed,
– activities performed in connection with the implementation
of the investment task, approved by the Supervisory Board
» set the scope, accuracy and time for submission by the Manage-
in accordance with § 8 sec. 11 item 9 of the Articles of As-
ment Board of its annual and long-term financial plans and plans
sociation, up to the amount not exceeding 110 percent
for the Company’s development strategy,
» approve the Company’s development strategy and long-term
financial plans,
of the amount allocated for this investment task,
– activities concerning the implementation of the investment task
and the related liabilities, if expenditures or charges do not
» issue opinions on the annual financial plans,
» give consent, upon the Management Board’s motion, to sell real
exceed the cap indicated in § 8 sec. 11 item 9 of the Articles
estate, perpetual usufruct or participation in real estate where
» carry out capital or tangible investments abroad worth more than
the net book value does not exceed one twentieth of the share
capital,
of Association,
one twentieth of the share capital,
» exercise the Company’s voting right at general meetings and
» give consent, upon the Management Board’s motion, to purchase
partners/associates/shareholders meetings of the subsidiaries
real estate, perpetual usufruct or participation in real estate where
and other entities, if the value of the shares or stakes held by
the net acquisition price exceeds one fortieth of the share capital,
the Company, at a price the shares were acquired or taken up
» give consent to purchase the Company’s own shares to prevent
exceed one fifth of the Company’s share capital, as regards
serious damage referred to in Article 362 § 1 point 1 of the Com-
merger with another company and Company restructuring,
mercial Code, posing a direct threat to the Company,
sale and lease of the Company’s undertaking and establishing
» appoint the acting President of the Management Board, referred
on it the right to use, amendments to the Articles of Incorpora-
to in § 9 item 3 point 3, in the event the President is suspended
tion or Articles of Association, execution of the concern contract
from duty or his/her mandate expires before the end of the term
within the meaning of Article 7 of the Commercial Code and
of office.
winding up of the Company,
115
» establish commercial law companies and join existing companies,
COMMITTEES OF SUPERVISORY BOARD
as well as to make contributions to cover shares in companies,
and to sell shares if the Company’s capital involvement in a given
The Supervisory Board of PKN ORLEN may elect permanent or ad
company so far, or commitment which the Company is about
hoc committees which act as its collective advisory and opinion
to achieve as a result of buying or acquiring shares, calculated
making bodies. The following permanent Committees operate within
on the basis of the share purchase or acquisition price, exceeds
the Supervisory Board of PKN ORLEN:
one tenth of the initial capital, excluding the purchase of shares
» Audit Committee,
» Strategy & Development Committee,
» Nomination & Remuneration Committee,
» Corporate Governance Committee.
in the regulated market,
» pay interim dividends to the shareholders.
If the Supervisory Board withholds its consent to any of the above
activities being taken, the Management Board can address the Gen-
The mentioned Committees report annually to the Supervisory Board
eral Meeting of Shareholders to adopt a resolution to approve
on its activities. Competences of the Committee is regulated by Terms
the relevant activity.
of the Supervisory Board, which is made available for shareholders
on the Company’s website www.orlen.pl.
Additionally, following a request of at least two members, the Supervisory Board is obliged to consider undertaking supervisory actions
All Committees are appointed by the Supervisory Board from amongst
specified in such request.
its members and the Committee itself chooses its Chairman. The Committees consist of between 3 to 5 members, but at least two members
Given the best practice standards and in order to enable the share-
of Audit Committee are independent members and at least one has
holders to make a true and fair view of the Company, the Supervisory
skills and expertise in the field of accounting or finance.
Board of PKN ORLEN is in charge of the additional duty to submit
to the General Meeting of the Company a concise assessment
The Committee meetings are convened by the Committee chair-
of PKN ORLEN’s standing, including internal control and risk manage-
man and, if he/she is either absent or unable to perform his/
ment system relevant for the Company. The assessment is submit-
her duties, by the chairman of the Supervisory Board or another
ted annually, before the date of the Company’s General Meeting
member of the Supervisory Board indicated by the chairman, who
to allow time for PKN ORLEN shareholders to get acquainted with
invites all the Committee Members to the meeting and notifies all
it. Moreover, the Supervisory Board prepares an annual report on its
the other Supervisory Board members of the meeting. All the members
work, in which it takes into account both the number of meetings
of the Supervisory Board can participate in the Committee meetings.
held and the most important issues dealt with in the year.
The Committee chairman can invite to the Committee meetings
members of the Management Board, the Company’s employees
and other persons whose participation in the meeting is expedient
to carry out the Committee tasks.
The Committee resolutions are passed with a simple majority
of the votes cast. In the event of an equal number of ‘for’ and
‘against’ vote cast, the Committee chairman has the casting vote.
116
Composition of Supervisory Board Committees of PKN ORLEN
The resignation of Mr Marek Karabuła and Mr Piotr Wielowieyski
in 2012
from the position of PKN ORLEN’s Supervisory Board Members
Composition of Supervisory Board Committees
of PKN ORLEN as at 1 January 2012
Name and surname
Supervisory Board Comitee
Artur Gabor
Committee Chairman, Independent
Marek Karabuła
Committee Member
Piotr Wielowieyski
Janusz Zieliński
Committee Member, Independent
Corporate Governance Committee
Angelina Sarota
Committee Chairwoman
Grzegorz Borowiec
Committee Member
Maciej Mataczyński
Committee Member
Strategy and Development Committee
Marek Karabuła
Krzysztof Kołach
Piotr Wielowieyski
Janusz Zieliński
of the Supervisory Board Committee.
On 30 May 2012 the Supervisory Board complemented composition
of the Supervisory Board Committees when the Ordinary General
Meeting of PKN ORLEN appointed as a new member of the Supervi-
Audit Committee
effective from 29 March 2012, caused reduction in composition
sory Board – Mr. Paweł Białek. Mr. Cezary Banasiński became a new
chairman of Strategy and Development Committee.
Until 31 December 2012 and the date of authorization of this
financial statement composition of the Supervisory Board Committee has not changed.
Composition of Supervisory Board Committees
of PKN ORLEN as at 31 December 2012
Name and surname
Audit Committee
Artur Gabor
Committee Chairman, Independent
Committee Member
Paweł Białek
Committee Chairman
Supervisory Board Comitee
Angelina Sarota
Committee Chairwoman
Nomination and Remuneration Committee
Grzegorz Borowiec
Committee Member
Maciej Mataczyński
Committee Chairman
Maciej Mataczyński
Committee Member
Grzegorz Borowiec
Committee Member
Paweł Białek
Artur Gabor
Krzysztof Kołach
Mr. Krzysztof Kołach and Janusz Zieliński were recalled from the Supervisory Board Committee with regards to changes in composition of the Supervisory Board which took place in January 2012.
Cezary Banasiński
Committee Chairman
Committee Member
Paweł Białek
Committee Member, Member
On 19 January 2012 Mr. Michał Gołębiowski was appointed
as a member of the Audit Committee, Strategy and Development
Maciej Mataczyński
Committee Chairman
Committee as well as Nomination and Remuneration Committee
Grzegorz Borowiec
Committee Member
by the Supervisory Board. Mr. Cezary Banasiński was appointed
Artur Gabor
Committee Member
Paweł Białek
Committee Member, Member
a member of the Strategy and Development Committee.
117
Audit Committee
» to consider all other issues relating to the Company’s audit raised
by the Committee or the Supervisory Board,
The task of the Audit Committee is to advise the Supervisory Board
of PKN ORLEN on the issues related to the proper implementation
» to notify the Supervisory Board of any material issues regarding
the operation of the Audit Committee.
of budget and financial reporting rules and internal control within
the Company and the ORLEN Group, as well as cooperation with
The Audit Committee meetings are held at least once per quarter,
the Company’s certified auditors. In particular, the tasks of the Com-
each time prior to the publication of the financial statements
mittee are:
by the Company.
» to monitor the work of the Company’s certified auditors and
submit recommendations to the Supervisory Board as to the sele
ction and fee of the Company’s certified auditors,
» to discuss with the Company’s certified auditors, prior to commencement of audit of each annual financial statements, the nature
and scope of the audit, and to monitor co-ordination of work
between the Company’s certified auditors,
» to review interim and annual financial statements of the Company
(consolidated and unconsolidated), with particular focus on:
– any changes of accounting standards, rules and practice,
– main areas of judgement,
– material corrections following from the audit,
The task of the Corporate Governance Committee is:
» to evaluate the implementation of the corporate governance
principles,
» to submit recommendations to the Supervisory Board
as to the implementation of the corporate governance principles,
» issue opinions on normative corporate governance documents,
» evaluate reports concerning compliance with the corporate
governance principles prepared for the Warsaw Stock Exchange,
» issue opinions on the draft amendments of the Company’s cor-
– going concern statements,
porate documents and to develop such drafts in case of own
– compliance with applicable accounting regulations.
documents of the Supervisory Board,
» to discuss any problems or objections that may result from
the audit of the financial statements,
» to analyse the letters to the Management Board drawn up by
» to monitor the management of the Company in terms of legal
and regulatory compliance, including the compliance with the PKN
ORLEN’s Code of Ethics and the corporate governance principles.
the Company’s certified auditors, independency and objectivity
of their audit and the Management Board’s replies,
» to give opinions on annual and long-term financial plans,
» to give opinions on the dividend policy, profit distribution and
issue of securities,
The task of the Strategy and Development Committee is to issue
opinions and submit recommendations to the Supervisory Board
» to review the management accounting system,
» to review the internal control system, including control mechanisms
on planned investments and divestments which exert a material
in terms of finance, operations, compliance with the provisions
» assesses the effect of planned and existing investments and
of law, risk and management assessment,
impact on the Company’s assets. In particular, the Committee:
divestments on the form of the Company’s assets,
» to review the reports of internal certified auditors employed by
» evaluates the activities, contracts, letters of intent and other
the Company and basic findings made by other internal analysts
documents relating to the actions aimed at acquisition, sale,
together with the Management Board’s replies to such findings,
encumbrance or any other disposal of the Company’s material
to review the independency of internal auditors and to give
assets,
opinions on the Management Board’s intentions as to employment or dismissal of the head of internal audit,
» to review, on an annual basis, the internal audit program, coordination of the work of internal and external auditors and to analyse
the conditions for internal auditors’ operation, cooperation with
the Company’s organisational units in charge of audit and control
and to evaluate their work on a periodical basis,
118
» issues opinions on any strategic documents which the Management Board submits to the Supervisory Board,
» issues opinions on the Company’s development strategy, including
long-term financial plans.
» annual bonus dependent on the accomplishment level of quantitative and qualitative targets,
The task of the Nomination and Remuneration Committee is to help
to attain the strategic goals of the Company by providing the Supervisory Board with opinions and motions on how to shape the manage-
» severance pay for dismissal from the Management Board Member
function,
» compensation for non-competition.
ment structure, with regard to organisational solutions, remuneration
schemes and selection of the staff with the skills required to ensure
Additional benefits for the Management Board Members may include
the Company’s success. In particular, the tasks of the Committee include:
company car, tools and technical appliances necessary to perform
» to initiate and issue opinions on the solutions in the area of Man-
the duties of the Management Board Member, cover the business
agement Board members nomination system,
travel and representation costs in the area and amount corresponding
» to issue opinions on the solutions proposed by the Management
to the assigned functions, life and endowment insurance agree-
Board in the area of the Company’s management system, aimed
ment, private health insurance for the Management Board Member
at ensuring efficiency, integrity and safety of the Company’s
and his/her closest family as well as possibility to cover reasonable
management,
expenses of personal and property protection.
» to periodically review and recommend the rules for determining
incentive schemes to the Management Board members and top
executives, with a view to the Company’s interest,
RULES FOR AWARDING BONUSES
TO THE KEY EXECUTIVE PERSONNEL
» to periodically review the remuneration system applicable to Management Board members and managerial staff directly report-
In 2012 the ORLEN Group’s key executive personnel was subjected
ing to the Management Board members, including managerial
to the annual MBO bonus system (management by objectives).
contracts and incentive schemes and to submit to the Super-
The regulations applicable to the PKN ORLEN’s Management Board,
visory Board the proposals how to shape them in the context
executive directors of PKN ORLEN, management boards of the ORLEN
of the Company’s strategic goal attainment,
Group and other key positions in the Group have certain common
» to submit to the Supervisory Board opinions on the rationale behind
features. The persons subject to the above mentioned systems
performance-driven remuneration, in the context of evaluating
are remunerated for the accomplishment of individual targets set
the degree to which the Company’s specified tasks and goals are met,
at the beginning of the bonus period by the Supervisory Board for
» to assess the Company’s human resources management system.
the Management Board Members and by the Management Board
Members for the key executive personnel. The targets set are
DESCRIPTION
OF THE REMUNERATION POLICY
AND THE RULES FOR ITS
DETERMINATION
qualitative or quantitative (measurable) and are settled following
the end of the year for which they were set, based on the rules
adopted in the applicable Bonus System Regulations. The bonus
systems are structured in a way so as to promote the cooperation
between individual employees in view to achieve the best possible
results at PKN ORLEN and ORLEN Group level.
The remuneration for the Supervisory Board Members is determined
by the Company’s General Meeting.
Following January 2012, the Rules for MBO bonuses to key executive personnel members in the ORLEN Group have been restated.
Remuneration for Members of the Board is determined by the Super-
The changes were implemented in order to increase flexibility and
visory Board taking into account the recommendations of the Nomi-
motivate capability of a system as well as adjustment of the Bonus
nation and Remuneration Committee.
Regulations to the best market practices.
The components of the Management Board Members remuneration system include:
» monthly fixed base pay,
119
12
Stronger consumption
In 2000-2009, the demand for natural gas
in Poland grew by approximately 25%.
At present, Poland’s natural gas
consumption is approximately 14 billion
cubic metres, most of which is imported,
with the main source market being
Russia. Approximately 30%, or 4 billion
cubic metres, is produced domestically.
Own energy sources
Accessing own natural gas sources,
including shale gas, is Poland’s opportunity
to end its dependence on foreign supplies
and to ensure its energy security.
From a gas importer Poland may become
an exporter, and Polish companies which
are actively engaged in operations related
to unconventional natural gas sources
will have an opportunity to strengthen
their international position.
CONSOLIDATED
FINANCIAL
STATEMENTS
Use of gas
OPI NION OF T HE IND EPENDENT AUDI TO R
TO THE GENERAL MEETING
OF POLSKI KONCERN NAFTOWY ORLEN
SPÓŁKA AKCYJNA
Auditor’s Responsibility
Our responsibility, based on our audit, is to express an opinion
on these consolidated financial statements. We conducted our
Opinion on the Consolidated Financial Statements
audit in accordance with section 7 of the Accounting Act, National
Standards on Auditing issued by the National Council of Certified
We have audited the accompanying consolidated financial statements
Auditors and International Standards on Auditing. Those standards
of the Group, whose parent entity is Polski Koncern Naftowy ORLEN
require that we comply with ethical requirements and plan and
Spółka Akcyjna with its registered office in Płock, ul. Chemików 7
perform the audit to obtain reasonable assurance whether the con-
(‘PKN ORLEN S.A. Group’), which comprise the consolidated state-
solidated financial statements are free from material misstatement.
ment of financial position as at 31 December 2012, the consolidated statement of profit or loss and other comprehensive income,
An audit involves performing procedures to obtain audit evidence
the consolidated statement of changes in equity and the consolidated
about the amounts and disclosures in the consolidated financial
statement of cash flows for the year then ended and additional
statements. The procedures selected depend on our judgement,
information to the consolidated financial statements, comprising
including the assessment of the risks of material misstatement
a summary of significant accounting policies and other explanatory
of the consolidated financial statements, whether due to fraud
information and notes.
or error. In making those risk assessments, we consider internal control
relevant to the entity’s preparation and fair presentation of the con-
Management’s and Supervisory Board’s Responsibility
solidated financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose
Management of the parent entity is responsible for the preparation
of expressing an opinion on the effectiveness of the entity’s inter-
and fair presentation of these consolidated financial statements in ac-
nal control. An audit also includes evaluating the appropriateness
cordance with International Financial Reporting Standards as adopted
of accounting policies used and the reasonableness of accounting
by the European Union and with other applicable regulations and
estimates made by management, as well as evaluating the overall
preparation of the report on the Group’s activities. Management
presentation of the consolidated financial statements.
of the parent entity is also responsible for such internal control
as management determines is necessary to enable the preparation
We believe that the audit evidence we have obtained is sufficient
of consolidated financial statements that are free from material
and appropriate to provide a basis for our opinion.
misstatement, whether due to fraud or error.
According to the Accounting Act dated 29 September 1994 (Official
Journal from 2013, item 330) („the Accounting Act’), Management
of the Parent Entity and members of the Supervisory Board are
required to ensure that the consolidated financial statements and
the report on the Group’s activities are in compliance with the requirements set forth in the Accounting Act.
122
Opinion
In our opinion, the accompanying consolidated financial statements
SPECIFIC COMMENTS
ON OTHER LEGAL
AND REGULATORY REQUIREMENTS
of PKN ORLEN S.A. Group have been prepared and present fairly,
in all material respects, the financial position of the Group as at
Report on the Group’s Activities
31 December 2012, its financial performance and its cash flows
for the year then ended, in accordance with International Financial
As required under the Accounting Act, we report that the Manage-
Reporting Standards as adopted by the European Union, and are
ment Board report on the Group’s activities includes, in all material
in compliance with the respective regulations that apply to the con-
respects, the information required by Art. 49 of the Accounting Act
solidated financial statements, applicable to the Group.
and by the Decree of the Ministry of Finance dated 19 February 2009
on current and periodic information provided by issuers of securities and the conditions for recognition as equivalent information
required by the law of a non-Member State (Official Journal from
2009, No 33, item 259 with amendments) and the information
is consistent with the consolidated financial statements.
On behalf of KPMG Audyt Sp. z o.o.
Registration No. 458
ul. Chłodna 51
00-867 Warsaw
Monika Bartoszewicz
Key Certified Auditor
Registration No. 10268
Director
28 March 2013
123
PKN ORLEN ANNUAL REPORT 2012
Consolidated financial statements for the year 2012
Consolidated financial statements
of ORLEN Capital Group
for the year ended 31 December 2012
Prepared in accordance with International Reporting Standards
as adopted by European Union
POLISH FINANCIAL SUPERVISION AUTHORITY
Consolidated Annual Report RS 2012 (year)
(in accordance with § 82 section 2 of the Minister of Finance Regulation of 19 February 2009, Official Journal No. 33, item 259 with further
amendments)
(for issuers of securities whose business activity embraces manufacture, construction, trade and services)
for the reporting year 2012, that is for the period from 1 January 2012 to 31 December 2012 which includes consolidated financial
statements prepared in accordance with International Financial Reporting Standards with amounts stated in the Polish currency (PLN).
on 29 March 2013
(submission date)
full name of the issuer:
abbreviated name of the issuer:
industrial sector in line with classification
of Warsaw Stock Exchange:
zip code:
location:
street:
number:
telephone:
fax:
e-mail:
NIP:
REGON:
www:
POLSKI KONCERN NAFTOWY ORLEN SPÓŁKA AKCYJNA
PKN ORLEN
OIL&GAS (pal)
09-411
PŁOCK
CHEMIKÓW
7
48 24 256 81 80
48 24 367 77 11
ir@orlen.pl
774-00-01-454
610188201
www.orlen.pl
KPMG AUDYT Sp. z o.o.
(Entity authorized to conduct audit)
124
ORLEN CAPITAL GROUP • CONSOLIDATED FINANCIAL STATEMENTS
Consolidated financial statements for the year 2012 (all amounts in PLN thousand)
SELECTED CONSOLIDATED FINANCIAL DATA
PLN thousand
EUR thousand
for the year
ended
31/12/2012
for the year
ended
31/12/2011
for the year
ended
31/12/2012
for the year
ended
31/12/2011
I.
Sales revenues
120,101,550
106,973,074
28,776,488
25,630,888
II.
Profit from operations
2,024,371
2,066,472
485,042
495,129
III.
Profit before tax
2,624,443
2,791,741
628,820
668,905
IV. Net profit attributable to equity holders of the parent
2,344,594
2,363,397
561,768
566,273
V.
Net profit
2,169,990
2,015,003
519,932
482,797
VI.
Total comprehensive income attributable to equity holders of the
parent
1,962,637
2,845,641
470,250
681,819
1,696,141
2,689,065
406,398
644,303
VII. Total net comprehensive income
VIII. Net cash provided by operating activities
3,089,185
761,106
740,172
182,362
IX.
Net cash provided by/(used in) investing activities
(2,874,856)
1,497,021
(688,819)
358,688
X.
Net cash provided by/(used in) financing activities
(3,411,473)
332,376
(817,393)
79,638
XI.
Net (decrease)/increase in cash and cash equivalents
(3,197,144)
2,590,503
(766,040)
620,688
5.48
5.53
1.31
1.32
as at
31/12/2012
as at a
31/12/2011
as at
31/12/2012
as at a
31/12/2011
XIII. Non-current assets
26,810,637
28,599,141
6,558,054
6,995,534
XIV. Current assets
25,820,143
30,132,337
6,315,773
7,370,563
XV. Total assets
52,630,780
58,731,478
12,873,827
14,366,097
XVI. Long-term liabilites
9,196,658
12,120,002
2,249,562
2,964,630
XVII. Short-term liabilities
15,127,289
19,812,793
3,700,232
4,846,337
XVIII.Total equity
28,306,833
26,798,683
6,924,033
6,555,130
XIX. Equity attributable to equity holders of the parent
26,479,187
24,533,773
6,476,979
6,001,119
XII. Net profit and diluted net profit per share attributable to equity
holders of the parent (in PLN/EUR per share)
XX. Share capital
XXI. Number of shares
XXII. Book value and diluted book value per share attributable to equity
holders of the parent (in PLN/EUR per share)
1,057,635
1,057,635
258,704
258,704
427,709,061
427,709,061
427,709,061
427,709,061
61.91
57.36
15.14
14.03
The above data for 2012 and 2011 was translated into EUR by the following exchange rates:
• items of assets, equity and liabilities – by the average exchange rate published by the National Bank of Poland as at 31 December 2012
– 4.0882 PLN/EUR;
• items of statement of profit or loss and other comprehensive income and statement of cash flows – by the arithmetic average of average
exchange rates published by the National Bank of Poland as of every last day of the month during the period 1 January – 31 December
2012 – 4.1736 PLN/EUR.
125
Consolidated statement of financial position
Note
as at
31/12/2012
as at
31/12/2011
Property, plant and equipment
7
24,743,734
26,578,651
Investment property
8
117,270
117,645
Intangible assets
9
1,447,300
1,323,044
Perpetual usufruct of land
10
97,777
95,664
Investments accounted for under equity method
11
11,932
13,125
Financial assets available for sale
13
40,820
40,520
33.2.
296,939
399,526
14
54,865
30,966
26,810,637
28,599,141
ASSETS
Non-current assets
Deferred tax assets
Other non-current assets
Current assets
Inventories
16
15,011,047
16,296,517
Trade and other receivables
17
8,075,302
8,071,011
Other short-term financial assets
18
368,125
293,434
89,625
33,684
Income tax receivable
Cash and cash equivalents
19
2,211,425
5,409,166
Non-current assets held for sale
20
64,619
28,525
25,820,143
30,132,337
52,630,780
58,731,478
Total assets
EQUITY AND LIABILITIES
EQUITY
Share capital
21.1.
1,057,635
1,057,635
Share premium
21.2.
1,227,253
1,227,253
Hedging reserve
21.3.
(73,232)
(24,305)
Revaluation reserve
21.4.
6,973
5,301
Foreign exchange differences on subsidiaries from consolidation
21.5.
80,926
415,628
Retained earnings
21.6.
24,179,632
21,852,261
26,479,187
24,533,773
1,827,646
2,264,910
28,306,833
26,798,683
Total equity attributable to equity holders of the parent
Non-controlling interest
Total equity
126
21.7.
Note
as at
31/12/2012
as at
31/12/2011
Loans, borrowings and debt securities
22
7,678,446
10,537,792
Provisions
23
660,279
621,379
LIABILITIES
Long-term liabilities
Deferred tax liabilities
33.2.
671,603
740,910
Deferred income
26
15,321
16,239
Other long-term liabilities
24
171,009
203,682
9,196,658
12,120,002
Short-term liabilities
Trade and other liabilities
25
12,655,891
15,092,524
Loans, borrowings and debt securities
22
1,294,641
2,459,799
83,737
673,643
Income tax liabilities
Provisions
23
802,719
1,008,140
Deferred income
26
168,305
136,379
Other financial liabilities
27
121,996
442,308
15,127,289
19,812,793
Total liabilities
24,323,947
31,932,795
Total equity and liabilities
52,630,780
58,731,478
127
Consolidated statement of profit or loss and other comprehensive income
for the year ended
31/12/2012
for the year ended
31/12/2011
29
120,101,550
106,973,074
30.1., 30.2.
(112,093,990)
(98,397,811)
8,007,560
8,575,263
Note
Statement of profit or loss
Sales revenues
Cost of sales
Gross profit on sales
Distribution expenses
30.2.
(3,871,660)
(3,660,256)
General and administrative expenses
30.2.
(1,523,632)
(1,468,298)
Other operating revenues
31.1.
726,401
1,006,655
Other operating expenses
31.2.
(1,314,298)
(2,386,892)
2,024,371
2,066,472
Financial revenues
32.1.
1,581,994
2,780,145
Financial expenses
32.2.
(981,226)
(2,243,175)
600,768
536,970
(696)
188,299
2,624,443
2,791,741
Financial revenues and expenses
Share in profit from investments accounted for under equity method
Profit before tax
Income tax expense
33
Net profit
(454,453)
(776,738)
2,169,990
2,015,003
3,277
10,389
(623)
(1,974)
(54,593)
(116,254)
(432,283)
759,813
Items of other comprehensive income
which will not be reclassified into profit or loss
Fair value measurement of investment property as at the date
of reclassification
Deferred tax
33
which will be reclassified into profit or loss under certain
conditions
Hedging instruments
Foreign exchange differences on subsidiaries from consolidation
Deferred tax
10,373
22,088
(473,849)
674,062
Total net comprehensive income
1,696,141
2,689,065
Net profit attributable to :
2,169,990
2,015,003
equity holders of the parent
2,344,594
2,363,397
non-controlling interest
(174,604)
(348,394)
Total comprehensive income attributable to:
1,696,141
2,689,065
equity holders of the parent
1,962,637
2,845,641
non-controlling interest
(266,496)
(156,576)
5.48
5.53
Net profit and diluted net profit per share attributable to equity holders
of the parent (in PLN per share)
128
33
Consolidated statement of cash flows
Note
for the year ended
31/12/2012
for the year ended
31/12/2011
2,169,990
2,015,003
696
(188,299)
2,260,122
2,379,948
(515,553)
729,342
342,091
381,683
(1,767)
(1,287)
829,028
(68,924)
Cash flows - operating activities
Net profit
Adjustments for:
Share in profit from investments accounted for under equity method
Depreciation and amortisation
30.2.
Foreign exchange (gain)/loss
Interest, net
Dividends
Loss/(Profit) on investing activities
Change in provisions
34
420,620
594,175
Income tax expense
33
454,453
776,738
(1,098,692)
(333,469)
(633,059)
(720,399)
Income tax (paid)
Other adjustments
34
Change in working capital
(1,138,744)
(4,803,405)
inventories
34
1,018,997
(4,565,020)
receivables
34
(135,551)
(1,319,184)
liabilities
34
(2,022,190)
1,080,799
3,089,185
761,106
(2,446,497)
(2,542,445)
44,735
324,705
(169,917)
(121,348)
Net cash provided by operating activities
Cash flows - investing activities
Acquisition of property, plant and equipment and intangible assets
Disposal of property, plant and equipment and intangible assets
Acquisition of shares
Disposal of shares
Acquisition of securities and deposits
Disposal of securities and deposits
370
3,675,922
(28,127)
(111,280)
22,479
115,700
Interest received
7,142
8,333
Dividends received
1,767
251,300
(268,255)
22,875
(38,553)
(126,741)
(2,874,856)
1,497,021
Proceeds from loans and borrowings received
4,557,429
18,892,646
Debt securities issued
1,000,000
—
(Outflows)/Proceeds from loans granted
Other
Cash flows - financing activities
(7,798,681)
(18,021,857)
Redemption of debt securities
Repayments of loans and borrowings
(750,000)
—
Interest paid
(373,156)
(496,462)
Payments of liabilities under finance lease agreements
(29,343)
(27,553)
Dividends paid to shareholders/non-controlling interest
(15,212)
(13,986)
(2,510)
(412)
Other
129
Consolidated statement of cash flows continued
for the year ended
31/12/2012
for the year ended
31/12/2011
Net cash provided by/(used in) financing activities
(3,411,473)
332,376
Net (decrease)/increase in cash and cash equivalents
(3,197,144)
2,590,503
(597)
(2,079)
5,409,166
2,820,742
2,211,425
5,409,166
Note
Effect of exchange rate changes
Cash and cash equivalents, beginning of the period
19
Cash and cash equivalents, end of the period
Statement of changes in consolidated equity
Equity attributable to equity holders of the parent
Share
capital
and
share
premium
Hedging
reserve
Foreign
exchange
differences
on
subsidiaries
from
consolidation
2,284,888
(24,305)
415,628
5,301
Net profit
—
—
—
Items of other
comprehensive
income
—
(48,927)
Total net
comprehensive
income
—
Change in the
structure of
non-controlling
interest*
Dividends
Total
Non-controlling
interest
Total
equity
21,852,261
24,533,773
2,264,910
26,798,683
—
2,344,594
2,344,594
(174,604)
2,169,990
(334,702)
1,672
—-
(381,957)
(91,892)
(473,849)
(48,927)
(334,702)
1,672
2,344,594
1,962,637
(266,496)
1,696,141
—
—
—
—
(17,223)
(17,223)
(154,888)
(172,111)
—
—
—
—
—
—
(15,880)
(15,880)
31 December 2012
2,284,888
(73,232)
80,926
6,973
24,179,632
26,479,187
1,827,646
28,306,833
1 January 2011
2,284,888
63,872
(149,492)
—
19,428,670
21,627,938
2,612,015
24,239,953
Net profit
—
—
—
—
2,363,397
2,363,397
(348,394)
2,015,003
Items of other
comprehensive
income
—
(88,177)
565,120
5,301
—
482,244
191,818
674,062
Total net
comprehensive
income
—
(88,177)
565,120
5,301
2,363,397
2,845,641
(156,576)
2,689,065
Change in the
structure of noncontrolling interest
—
—
—
—
60,194
60,194
(177,625)
(117,431)
1 January 2012
Dividends
31 December 2011
Revaluation
reserve
Retained
earnings
—
—
—
—
—
—
(12,904)
(12,904)
2,284,888
(24,305)
415,628
5,301
21,852,261
24,533,773
2,264,910
26,798,683
* Additional information on change in the structure of non-controlling ineterst is presented in note 5.1.
130
ACCOUNTING PRINCIPLES AND OTHER EXPLANATORY INFORMATION
1. General information
1.1. Principal activity of the Capital Group
Polski Koncern Naftowy ORLEN Spółka Akcyjna seated in Płock, 7 Chemików Street (“Company”, “PKN ORLEN”, “Issuer”, “Parent
Company”) was established through transformation of a state-owned enterprise into a joint stock company, on the basis of the Public
Notary Act of 29 June 1993. The Company was registered as Mazowieckie Zakłady Rafineryjne i Petrochemiczne “Petrochemia Płock” S.A.
in the District Court in Płock. Effective 20 May 1999, the Company changed its business name to Polski Koncern Naftowy Spółka Akcyjna.
On 7 September 1999, Centrala Produktów Naftowych (“CPN”) Spółka Akcyjna was incorporated, thus CPN was removed from the commercial register. Effective 12 April 2000, the Company changed its business name to Polski Koncern Naftowy ORLEN Spółka Akcyjna.
According to Warsaw Stock Exchange classification PKN ORLEN belongs to oil and gas sector.
As at 31 December 2012 the Parent Company owned directly or indirectly investment in shares in 88 related entities.
Polski Koncern Naftowy ORLEN S.A., together with the companies, which form the ORLEN Capital Group, is a leader in the oil sector
in the region – leading manufacturer and distributor of refinery and petrochemical products.
Principal activity of the Polski Koncern Naftowy ORLEN S.A. Capital Group (“ORLEN Capital Group”, “Group” „Capital Group”) includes:
• processing of crude oil and manufacturing of oil-derivative products and semi finished products (refinery and petrochemical),
• manufacture of basic chemicals, fertilizers and nitrogen compounds, plastics and synthetic rubber,
• production of pig iron, ferro-alloys, iron and steel, steel products, noble metals and other non-iron metals,
• purchase, processing and trade of used lubricant oils and other chemical waste,
• manufacturing, transfer and trade in heating energy and electricity,
• manufacturing and supply of air conditioning systems with water vapour, hot water and air,
• domestic and foreign trade on own account, on a commission and as a consignee, including in particular: the trade in crude oil, oilderivative and other fuel, sale of industrial and consumer goods,
• research and development activity, project work, construction and production activities on own account and as a consignee, in the areas
of processing, storage, packaging and trade in solid, liquid and gaseous oil fuels, derivative chemical products as well as transportation:
road, rail, water and by pipeline,
• storage of crude oil and liquid fuels, creation and management of oil stock in accordance with appropriate regulations,
• services connected to the principal activity, in particular: sea and land reloading, refining of gas and oil including ethylization, dyeing
and blending of components,
• overhaul of appliances used in principle activities, especially refinery and petrochemical installations, oil storage appliances, petrol stations and means of transportation,
• activity connected to reclamation of land and other services related to waste management,
• operation of petrol stations, bars, restaurants and hotels as well as catering activities,
• financial holding activities, brokerage and other financial activities,
• natural gas and crude oil exploration and extraction,
• accounting and bookkeeping services, tax advisory,
• services to the entire society, medical services, fire protection, education.
1.2. Concessions held
The Group, due to its operations of a high importance to the public interest, is the holder of particular concessions granted by proper
bodies of the public administration based on respective regulations.
as at 31/12/2012
Remaining concession
periods (in years)
Electrical energy: manufacturing, distribution and trade
5-13
Heating energy: manufacturing, transmission, distribution and trade
7-18
Liquid and gaseous fuels: manufacturing, transmission, distribution, trade, storage
2-28
Non-reservuar storage of crude oil and liquid fuels
17
Rock salt: exploitation and recognition
1-21
Exploration and recognition of crude oil and natural gas deposits
Personal and property security services
1-3
indefinetely
The process of granting concessions in the Group is periodical and administrative in nature. The Management Board believes that the probability of failure in obtaining required concessions is remote.
The Group as the owner of the particular concession is paying annual fees that are recognized as a cost of the period.
As at 31 December 2012 and 31 December 2011 the Group had no liabilities related to concession services in scope of IFRIC 12.
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1.3. Shareholders’ structure
Shareholders holding directly or indirectly via related parties, at least 5% of total votes at the General Shareholders’ Meeting of the Parent
Company as at 31 December 2012
State Treasury
Number of shares
Number
of voting rights
Nominal value of
shares (in PLN)
hare in share capital
117,710,196
117,710,196
147,137,745
27.52%
Aviva OFE*
21,744,036
21,744,036
27,180,045
5.08%
ING OFE**
21,464,398
21,464,398
26,830,497
5.02%
Other
266,790,431
266,790,431
333,488,039
62.38%
427,709,061
427,709,061
534,636,326
100.00%
* according to the information obtained by the Parent Company from fund as at 9 Feburary 2010
** according to the information obtained by the Parent Company from fund as at 30 March 2012
1.4. Composition of the Management Board and the Supervisory Board of the Parent
As at 31 December 2012 and as at the date of preparation of foregoing consolidated financial statements, the composition of the management and supervisory boards of the Parent is as follows:
Management Board
• Dariusz Krawiec
• Sławomir Jędrzejczyk
• Piotr Chełmiński
• Krystian Pater
• Marek Podstawa
– President of the Management Board, General Director
– Vice-President of the Management Board, Chief Financial Officer
– Member of the Management Board, Petrochemistry
– Member of the Management Board, Refinery
– Member of the Management Board, Sales
Supervisory Board
– Chairman of the Supervisory Board
• Maciej Mataczyński
• Leszek Jerzy Pawłowicz – Deputy Chairman of the Supervisory Board
• Angelina Sarota
– Secretary of the Supervisory Board
• Cezary Banasiński
– Member of the Supervisory Board
• Paweł Białek – Member of the Supervisory Board
• Grzegorz Borowiec
• Artur Gabor
• Michał Gołębiowski
2. Statements of the Management Board
2.1. In respect of the reliability of consolidated financial statements
The Management Board of PKN ORLEN hereby declares that to the best of their knowledge the foregoing consolidated financial statements
and comparative data were prepared in compliance with the accounting principles applicable to the Group in force (disclosed in note 3)
and that they reflect true and fair view on financial position and financial result of the Group and that the Management Board Report
on the Group’s Operations presents true overview of business situation developments and achievements of Capital Group, including basic
risks and exposures.
2.2. In respect of the entity authorized to conduct audit of financial statements
The Management Board of PKN ORLEN declares that the entity authorized to conduct audit and conducting the audit of the consolidated
financial statements, was selected in compliance with the law and that the entity and auditors conducting the audit met the conditions
to issue an independent opinion in compliance with relevant regulations.
KPMG Audyt Sp. z o.o. is the entity authorized to conduct audit of separate financial statements of PKN ORLEN and consolidated financial
statements of ORLEN Capital Group for the year 2012.
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3. Accounting policies
3.1. Principles of presentation
The consolidated financial statements have been prepared in accordance with accounting principles contained in the International Financial
Reporting Standards (IFRS), comprising International Accounting Standards (IAS) as well as Interpretation of Standing Interpretation
Committee (SIC) and the IFRS Interpretations Committee (IFRIC), which were adopted by the European Union (EU) and were in force as at
31 December 2012. The scope of consolidated financial statements is compliant with Minister of Finance Regulation of 19 February 2009
on current and periodic information provided by issuers of securities and conditions for recognition as equivalent information required
by the law of a non-Member state (Official Journal no. 33, item 259 with further amendments) and covers the annual period from 1
January to 31 December 2012 and the comparative period from 1 January to 31 December 2011.
Presented consolidated financial statements are compliant with all requirements of IFRSs adopted by the EU and present a true and fair
view of the Capital Group’s financial position as at 31 December 2012, results of its operations and cash flows for the year ended 31
December 2012.
The consolidated financial statements have been prepared assuming that the Capital Group will continue to operate as a going concern
in the foreseeable future. As at the date of approval of these separate financial statements, there is no evidence indicating that the Capital
Group will not be able to continue its operations as a going concern. Duration of the Parent Company and the entities comprising
the ORLEN Capital Group is unlimited.
The foregoing consolidated financial statements, except for consolidated cash flow statement, have been prepared using the accrual
basis of accounting.
3.2. Impact of IFRS amendments and interpretations on separate financial statements of the Capital Group
3.2.1. Binding amendments and interpretations to IFRSs
The amendments to standards and IFRS interpretations, in force from 1 January 2012 until the date of publication of these consloidated
financial statements, i.e. amendments to IFRS 7 Financial Instruments: Disclosures – Transfers of financial assets, had no impact on the foregoing consolidated financial statements.
3.2.2. IFRSs and their interpretations, announced and adopted by the European Union, not yet effective
Early application
The Group has applied the amendments to IAS 1 not yet effective in the foregoing consolidated financial statements.
Amendments to IAS 1 Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income
The Capital Group, taking the possibility of the earlier application, applied in the foregoing consolidated financial statements the amendments to IAS 1, which will be effective for the financial statements for annual periods beginning on or after 1 July 2012.
As a result, the title of the “statement of comprehensive income” was changed to the “statement of profit or loss and other comprehensive
income” as well as the items of other comprehensive income that may be reclassified to profit or loss in the future after fulfilling certain
conditions are presented separately from those that would never be reclassified to profit or loss.
Application according to the effective date
The Capital Group intends to adopt listed below new standards and amendments to the standards and interpretations to IFRSs that are
published by the International Accounting Standards Board, but not effective as at the date of publication of these financial statements,
in accordance with their effective date.
Amendments to IFRS 1 – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters
The amendment adds an exemption that an entity can apply, at the date of transition to IFRSs after being subject to severe hyperinflation.
This exemption allows the entity to measure all assets and liabilities held before the functional currency normalization date at fair value
and use that fair value as a deemed cost of those assets and liabilities in the opening IFRS statement of financial position.
An entity shall apply those amendments for annual periods beginning on or after 1 January 2013.
Adoption of the amendments to standard will have no impact on future consolidated financial statements, as the Capital Group applies
IFRSs since the year 2005.
Amendments to IFRS 1 – First-time adopters:
Government Loans
The amendments add a new exception to retrospective application of IFRS. A first-time adopter of IFRS now applies the measurement
requirements of financial instruments standards (IAS 39 or IFRS 9) to a government loan with a below-market rate of interest prospectively
from the date of transition to IFRS.
Alternatively, a first-time adopter may elect to apply the measurement requirements retrospectively to a government loan, if the information needed was obtained when it first accounted for that loan. This election is available on a loan-by-loan basis.
Effective for periods beginning on or after 1 January 2013.
It is expected that, at the date of adoption, the amendments to standard will have no impact on future consolidated financial statements,
as the Capital Group applied MSSF since the year 2005.
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Amendments to IFRS 7 – Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities
The Amendments contain new disclosure requirements for financial assets and liabilities that are offset in the statement of financial position or are subjected to master netting arrangements or similar agreements.
The adoption of the new standard will have no impact on the future consolidated financial statements since the Capital Group does not
apply offsetting to any of its financial assets and financial liabilities and it has not entered into master netting arrangements.
New Standard IFRS 10 – Consolidated Financial Statements
IFRS 10 replaces IAS 27 Consolidated and separate financial statements, in scope of consolidation and SIC 12 interpretation Special
Purpose Entities.
IFRS 10 provides a new single model to be applied in the control analysis for all investees, including entities that currently are Special
Purpose Entities in the scope of SIC-12.
Under the new single control model, an investor controls an investee when:
• it is exposed or has rights to variable returns from its involvements with the investee,
• has the ability to affect those returns through its power over that investee and
• there is a link between power and returns.
It is expected that the adoption of the new standard will have no impact on the future consolidated financial statements, as the initial
evaluation of the control over the entities, conducted according to the new standard, will not change conclusions as regards the control
of the Capital Group over those entities.
New Standard IFRS 11 – Joint Arrangements
IFRS 11 “Joint Arrangements”, supersedes and replaces IAS 31 “Interest in Joint Ventures” and SIC-13 “Jointly Controlled Entities – Non
Monetary Contributions by Venturers”.
IFRS 11 does not introduce substantive changes to the overall definition of an arrangement subject to joint control, although the definition
of control, and therefore indirectly of joint control, has changed due to IFRS 10.
Under the new Standard, joint arrangements are divided into two types, each having its own accounting model defined as follows:
• a joint operation is one whereby the jointly controlling parties, known as the joint operators, have rights to the assets, and obligations
for the liabilities, relating to the arrangement;
• a joint venture is one whereby the jointly controlling parties, known as joint ventures, have rights to the net assets of the arrangement.
IFRS 11 effectively carves out, from IAS 31, those cases in which although there is a separate vehicle for the joint arrangement, that separation is ineffective in certain ways. These arrangements are treated similarly to jointly controlled assets/operations (recognizing particular
items of assets and liabilities), under IAS 31, and are now called joint operations. The remainder of IAS 31 jointly controlled entities, now
called joint ventures, must be accounted for using the equity method. Proportionate consolidation is no longer possible.
If the new Standard had been applied from 31 December 2012, the impact would be that joint arrangements for Basell Orlen Polyolefines
Sp. z o.o. Group (BOP) and Płocki Park Przemysłowo-Technologiczny S.A. (PPPT) should be accounted for using the equity method instead
of proportionate consolidation. The financial data as at 31 December 2012 and 31 December 2011 were disclosed in note 12. The adoption of the new standard will have no effect on consolidated net profit of the Group.
New Standard- IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 requires additional disclosures relating to significant judgments and assumptions made in determining the nature of interests
in subsidiaries, joint arrangements and associates and unconsolidated structured entities.
It is expected that the new standard, when initially applied, will increase the number of disclosures of interest in other entities in the financial statements.
New Standard – IFRS 13 Fair Value Measurement
IFRS 13 replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value measurement guidance.
It defines fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements.
IFRS 13 explains ‘how’ to measure fair value when it is required or permitted by other IFRSs. IFRS 13 does not introduce new requirements
to measure assets or liabilities at fair value, nor does it eliminate the practicability exceptions to fair value measurements that currently exist
in certain standards. The standard contains an extensive disclosure framework that provides additional disclosures to existing requirements
to provide information that enables financial statement users to assess the methods and inputs used to develop fair value measurements
and, for recurring fair value measurements that use significant unobservable inputs, the effect of the measurements on profit or loss or
other comprehensive income.
The Company does not expect IFRS 13 to have material impact on the consolidated financial statements, as the Management assesses
the methods and assumptions used when measuring assets at fair value as being in line with IFRS 13.
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Amendments to IAS 12 Income taxes – Deferred tax: Recovery of Underlying Assets Amendments introduced in 2010 provide the exception to the current measurement principles based on the manner of recovery in § 52
of IAS 12 for investment property measured using fair value model in IAS 40 by introducing a rebuttable presumption that in these for
the assets the manner of recovery will be entirely by sale. Management’s intention would not be relevant unless the investment property
is depreciable and held within a business model whose objective is to consume substantially all of the asset’s economic benefits over
the life of the asset.
The Company expects that new standard will have no significant impact on future consolidated financial statements, as the amendments
to IAS 12, are not applicable to the Capital Group.
Amendments to IAS 19 – Employee Benefits
The amendment removes the so-called corridor method previously applicable to recognising actuarial gains and losses, and eliminates
the ability for entities to recognise all changes in the defined benefit obligation and in plan assets in profit or loss, which currently is allowed under the requirements of IAS 19. The amendment requires actuarial gains and losses to be recognised immediately in other
comprehensive income.
Effective for periods beginning as the or after 1 January 2013.
The Company expects that the amendments to the standard listed above will have an impact on future consolidated financial statements
since the Capital Group will present actuarial gains and losses as the position of other comprehensive income, not in the profit or loss
statement, as so far. For the year ended 31 December 2012, net actuarial gains and losses amounted to PLN (19,064) thousand.
Amendments to IAS 27 – Separate Financial Statements
IAS 27 (2011) was modified in relation to issuance of IFRS 10 Consolidated Financial Statement and carries forward the existing accounting and disclosure requirements for separate financial statements. For that reason requirements of IAS 28 (2008) and IAS 31 relating
to separate financial statements will be incorporated to IAS 27.
The above amendment will have no impact on the future consolidated financial statements, since it relates to separate financial statements.
Amendments to IAS 28 – Investments in Associates and Joint Ventures
Adopted amendments comprise:
• associates and joint ventures held for sale. IFRS 5 Non-current Assets Held for Sale and Discontinued Operations applies to an investment, or a portion of an investment, in an associate or a joint venture that meets the criteria to be classified as held for sale. For any
retained portion of the investment that has not been classified as held for sale, the equity method is applied until disposal of the portion
held for sale. After disposal, any retained interest is accounted for using the equity method if the retained interest continues to be an
associate or a joint venture,
• changes in interests held in associates and joint ventures. Previously, IAS 28 (2008) and IAS 31 specified that the cessation of significant
influence or joint control triggered remeasurement of any retained stake in all cases, even if significant influence was succeeded by joint
control. IAS 28 (2011) now requires that in such scenarios the retained interest in the investment is not remeasured.
It is expected that the above amendment, when initially applied, will have no material impact on the future consolidated financial statements, as the Capital Group holds no significant investments in associates or joint ventures that are classified as held for sale.
Amendments to IAS 32 – Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities
The Amendments do not introduce new rules for offsetting financial assets and liabilities; rather they clarify and define precisely the offsetting criteria. The entity has a legally enforceable right to offset if that right is not contingent on a future event and is enforceable both
in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties.
It is expected that the amendment, when initially applied, will have no impact on future consolidated financial statements, since the Capital
Group does not apply offsetting to any of its financial assets and financial liabilities and it has not entered into master netting arrangements.
New Interpretation IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine
The Interpretation sets out requirements relating to the recognition of production stripping costs, initial measurement of stripping activity
assets, and subsequent measurement of stripping activity assets as at reporting date.
Production stripping costs, that will cause the flow of future economic benefits to the entity, may be capitalized by an entity if a certain
criteria are met. Capitalization and depreciation period will be dependent on identified inventory, to which the stripping costs refer to.
It is expected the interpretation, when initially applied, will have no impact on the future consolidated financial statements, since the Capital
Group does not have any stripping activities.
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3.2.3. Standards and interpretations adopted by International Accounting Standards Board (IASB),
waiting for approval of EU
New standard and amendments to IFRS 9 – Financial Instruments
New standard replaces guidance in IAS 39 Financial Instruments: Recognition and Measurement about classification and measurement
of financial assets. The standard eliminates existing IAS 39 categories: held to maturity, available for sale and loans and receivables. At the initial recognition, financial assets will be classified as: financial assets measured at amortised cost or financial assets measured at fair value.
The 2010 amendments to IFRS 9 replace the guidance in IAS 39 Financial Instruments: Recognition and Measurement mainly about liabilities
“designated as fair value through profit or loss” in case of changes in fair value, as a result of changes in credit risk of a liability, that are
presented directly in other comprehensive income. Amounts presented in other comprehensive income are not subsequently reclassified
to profit or loss. Accumulated profit or loss may be transferred within equity.
New standard eliminates the requirement of separation the embedded derivatives from host contract. It requires the hybrid (combined)
contract measured at amortised cost or fair value.
Moreover, the amendments change the disclosure and restatement requirements relating to the initial application of IFRS 9.
IFRS 9 and amendments to IFRS 9 are effective for periods on or after 1 January 2015.
It is expected that new standard will not have an impact on items presented in future financial statements. Based on the standard, assets
will be assigned to changed financial instruments categories.
Amendments to IFRS 10, IFRS 11 and IFRS 12: Transition Guidance
The amendments:
• define the date of initial application of IFRS 10 as the beginning of the annual period in which the standard is applied for the first
time (1 January 2013 unless early adopted). At this date, an entity tests whether there is a change in the consolidation conclusion for
its investees,
• limit the restatement of comparatives to the period immediately preceding the date of initial application; this applies to the full suite
of standards. Entities that provide comparatives for more than one period have the option of leaving additional comparative periods
unchanged,
• requires disclosure of the impact of the change in accounting policy only for the period immediately preceding the date of initial application (i.e. disclosure of impact on the current period is not required),
• will remove the requirement to present comparative information disclosures related to unconsolidated structured entities for any periods
before the first annual period for which IFRS 12 is applied.
Effective for periods on or after 1 January 2013.
It is expected that the application of the new standard will not have any impact on future consolidated financial statements of the Capital
Group as the amendments define precisely guidelines as regards the transition period for the standards mentioned above.
Amendments do IFRS 10, IFRS 12 and IAS 27: Investment Entities
The Amendments provide an exception to the consolidation requirements in IFRS 10 and require qualifying investment entities to measure
their investments in controlled entities – as well as investments in associates and joint ventures – at fair value through profit or loss, rather
than consolidating them.
The consolidation exemption is mandatory (i.e. not optional), with the only exception being that subsidiaries that are considered as an
extension of the investment entity’s investing activities, must still be consolidated.
An entity qualifies as an investment entity if it meets all of the essential elements of the definition of an investment entity. According
to these essential elements an investment entity:
• obtains funds from investors to provide those investors with investment management services,
• commits to its investors that its business purpose is to invest for returns solely from appreciation and/or dividend income and
• measures and evaluates the performance of substantially all of its investments on a fair value basis.
The amendments also set out disclosure requirements for investment entities.
Effective for annual periods on or after 1 January 2014.
It is expected that the application of the new standard will not have any impact on future consolidated financial statements as the amendments are not applicable to the Group.
Improvements to International Financial Reporting Standards 2009-2011: Amendments to IFRS
The Improvements to International Financial Reporting Standards’s (2009-2011) contains 7 amendments to 5 standards, with consequential
amendments to other standards and interpretations. The main changes relate to:
• repeated application of IFRS 1 – a repeated adopter that elects not to apply IFRS 1 has to apply IFRS retrospectively in accordance with
IAS 8, as if it had never stopped applying IFRS,
• clarification that first-time adopter of IFRS choosing to apply borrowing costs exemptions should not restate the borrowing cost component that was capitalized under previous GAAP and should account for borrowing cost incurred on or after the date of transition (or
an earlier date, as permitted by IAS 23) in accordance with IAS 23,
• clarification that only one comparative period, which is the preceding period, is required to a complete set of financial statements;
however if additional comparative information is prepared it should be accompanied by related notes and be in accordance with IFRS,
• clarification that the opening statement of financial position is required only if a change in accounting policy, a retrospective restatement or reclassification has a material effect upon the information in that statement of financial position and except for the disclosures
required under IAS 8, other notes related to the opening statement of financial position are no longer required,
• clarification on the classification and accounting of spare parts, stand-by equipment and servicing equipment,
• removal of inconsistencies between IAS 32 and IAS 12 in respect of distributions to holders of an equity instrument and transaction
costs of an equity transaction, by clarification that IAS 12 applies to the accounting for income taxes relating to those transactions,
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• additional disclosure required of a measure of total assets and liabilities for a particular reportable segment for interim financial reporting.
Effective for periods on or after 1 January 2013.
The Capital Group does not expect the amendments to have any impact on the future consolidated financial statements.
3.2.4. Presentation changes
In the year 2012 and comparable periods, no material changes in the presentation of financial data occurred.
3.2.5. Functional currency and presentation currency of financial statements and methods applied to translation
of data for consolidation purposes
3.2.5.1. Functional currency and presentation currency
The functional currency of the Parent Entity and presentation currency of the foregoing consolidated financial statements is Polish Złoty
(PLN). The data is presented in PLN thousand in the consolidated financial statements, unless is stated differently.
3.2.5.2. Methods applied to translation of data for consolidation purposes
Financial statements of foreign entities, for consolidation purposes, are translated into PLN using the following methods:
• particular assets and liabilities – at spot exchange rate as at the end of the reporting period,
• respective items of statement of comprehensive income and statement of cash flows are translated at the average rate (arithmetic
average of average exchange rates published by the National Bank of Poland (“NBP”) in the reporting period).
Foreign exchange differences occurred as a result of above recalculations are recognised in the equity as foreign exchange differences
on subsidiaries from consolidation.
average exchange rate
for the reporting period
exchange rate at the end
of the reporting period
for the year ended
31/12/2012
for the year ended
31/12/2011
as at
31/12/2012
as at
31/12/2011
PLN/EUR
4.1859
4.1186
4.0882
4.4168
PLN/USD
3.2577
2.9638
3.0996
3.4174
PLN/CZK
0.1665
0.1675
0.1630
0.1711
CURRENCIES
Accounting policies for foreign currency transactions are disclosed in note 3.3.2.
3.3. Applied accounting policies
3.3.1. Change in accounting policies, estimates and prior period errors
An entity shall change an accounting policy only if the change:
• is required by an IFRS,
• results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or
conditions on the financial position, financial performance or cash flows.
In case of change in accounting policy it is assumed that the new policy had always been applied. The amount of the resulting adjustment
is made to the equity. For comparability, the entity shall adjust the financial statements (comparative information) for the earliest prior
period presented as if the new accounting policy had always been applied, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change.
Items of financial statements based on an estimate may need revision if changes occur in the circumstances on which the estimate was
based or as a result of new information or more experience. The effects of changes in estimates are accounted prospectively in the statement of profit or loss and other comprehensive income.
The correction of a material prior period error is made to the equity. When preparing the financial statements it is assumed that the errors
were corrected in the period when they occurred.
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3.3.2. Transactions in foreign currency
A foreign currency transaction shall be recorded, on initial recognition in the functional currency, by applying to the foreign currency
amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
At the end of each reporting period:
• foreign currency monetary items, including units of currency held by the Capital Group and receivables and liabilities due in a defined
or definable units of currency shall be translated using the closing rate, i.e. the spot rate at the end of the reporting period,
• non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate
at the date of the transaction and
• non-monetary items that are measured at fair value in a foreign currency shall be translated using the exchange rates at the date when
the fair value was determined.
The Capital Group recognises exchange differences arising on the settlement of monetary items or on translating monetary items at rates
different from those at which they were translated on initial recognition during the period in which they arise, except for the monetary
items which hedge the currency risk and are accounted in accordance with the cash flow hedge accounting principles.
3.3.3. Principles of consolidation
The consolidated financial statements of the Group include data of Parent Company, its subsidiaries and jointly controlled entities (joint
ventures) prepared as at the end of the same reporting period as separate financial statements of the Parent Company and using uniform
accounting principles in relation to similar transactions and other events in similar circumstances.
3.3.3.1. Investments in subsidiaries
Subsidiaries are entities under the Parent’s control. It is assumed that the Parent Company controls another entity if it holds directly or
undirectly – through its subsidiaries – more than 50% of the voting rights in an entity, unless in exceptional circumstances, it can be
clearly demonstrated that such ownership does not constitute control. Control also exists when the Parent Company owns half or less
of the voting power of an entity when there is:
• power over more than half of the voting rights by virtue of an agreement with other investors,
• power to govern the financial and operating policies of the entity under a statute or an agreement,
• power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity
is by that board or body, or
• power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by
that board or body.
Subsidiaries are consolidated using the full consolidation method.
Non-controlling interests shall be presented in the consolidated statement of financial position within equity, separately from the equity
of the owners of the Parent Company.
3.3.3.2. Investments in jointly controlled entities
A jointly controlled entity is a joint venture that involves the establishment of a corporation, partnership or other entity in which each
venturer has an interest. The entity operates in the same way as other entities, except that a contractual arrangement between the venturers establishes joint control over the economic activity of the entity.
Contractual arrangement establishes joint control over a joint venture. The requirement ensures that no single venturer is in a position
to control the activity unilaterally. The existence of a contractual arrangement distinguishes interests that involve joint control from investments in associates in which the investor has significant influence.
Interests in joint ventures are investments, when the venturer has joint control. It is assumed that the party has joint control when the strategic financial and operating decisions require the unanimous consent of the parties sharing control. Investments in jointly controlled
entities are accounted for using the proportionate method.
3.3.3.3. Investment in associates
Investments in associates relates to the entities over which the investor has significant influence and that are neither controlled nor jointly
controlled.
It is assumed that the Investor has significant influence over another entity, if it has ability to participate in financial and operating decisions of the entity. Particularly, the significant influence is evidenced when the Group holds directly or indirectly more than 20%, and
no more than 50% of the voting rights of an entity and participation in financial and operating decisions is not contractually or actually
restrained and is actually executed.
Investments in associates are accounted for using the equity method, based on financial statements of associates prepared as at the end
of same reporting period as separate financial statements of the Parent Company and using uniform accounting principles in relation
to similar transactions and other events in similar circumstances.
3.3.3.4. Consolidation procedures
The consolidated financial statements are prepared using the full consolidation method and the proportionate method. When investor
has significant influence over another entity, equity method is used to evaluate shares in entity.
Consolidated financial statements are the financial statements of a Group presented as those of a single economic entity.
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In preparing consolidated financial statements using full consolidation method, an entity combines the financial statements of the Parent
Company and its subsidiaries line by line by adding together like items of assets, liabilities, equity, income and expenses and then performs
adequate consolidation procedures:
• the carrying amount of the Parent’s investment in each subsidiary and the Parent’s portion of equity of each subsidiary are eliminated,
• non-controlling interests in the profit or loss of consolidated subsidiaries for the reporting period are identified,
• non-controlling interests in the net assets of consolidated subsidiaries are identified and presented separately from the Parent’s ownership interests in them,
• intra group balances are eliminated,
• intra group revenues and expenses are eliminated,
• unrealized profits or losses from intra group transactions are eliminated,
• intra group cash flows are eliminated.
The application of proportionate consolidation means that the venturer assumes its proportionate share in assets, liabilities and equity,
income and expenses of the jointly controlled entity, which are added together with the like items in consolidated financial statements
and then performs adequate consolidation procedures, including eliminations.
Under the equity method, the investment in an associate is initially recognised at cost and the carrying amount is increased or decreased
to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The investor’s share of the profit or loss
of the investee is recognised in the investor’s profit or loss. Distributions received from an investee reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the investor’s proportionate interest in the investee
arising from changes in the investee’s other comprehensive income. Such changes include those arising from the revaluation of property,
plant and equipment and from foreign exchange translation differences. The investor’s share of those changes is recognised in other
comprehensive income of the investor.
3.3.4. Business combinations
An entity shall account for each business combination by applying the acquisition method. Applying the acquisition method requires:
• identifying the acquirer,
• determining the acquisition date,
• recognising and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree and
• recognising and measuring goodwill or a gain from a bargain purchase.
Business combinations under common control (within the Group) are accounted by applying the acquisition method or uniting of interest
method, choosing the method that adequately reflects the economic nature of the transaction.
The fair value of assets, liabilities and contingent liabilities for the purpose of allocating the acquisition cost is determined in accordance
with principles set in attachment B to IFRS 3.
3.3.5. Operating segments
An operating segment is a component of a Capital Group:
• that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating
to transactions with other components of the same entity),
• whose operating results are regularly reviewed by the Company’s chief operating decision maker to make decisions about resources
to be allocated to the segment and assess its performance, and
• for which discrete financial information is available.
The operations of the Capital Group were divided into the following segments:
• the refining segment, which includes refinery products processing and wholesale, oil production and sale as well as supporting production,
• the retail segment, which includes sales at petrol stations,
• the petrochemical segment, which includes the production and wholesale of petrochemicals and production and sale of chemicals,
supporting production,
and corporate functions, which are reconciling items and include activities related to management and administration, upstream and
other support functions as well as remaining activities not allocated to separate segments.
Segment revenues from sales to external customers or revenues from transactions with other segments that are directly attributable
to a segment.
Segment expenses are expenses resulting from the operating activities of a segment that are directly attributable to the segment and
the relevant portion of the Company’s expenses that can be allocated on a reasonable basis to a segment, including expenses relating
to sales to external customers and expenses relating to transactions with other segments.
Segment expenses do not include:
• income tax expense,
• interest, including interest incurred on advances or loans from other segments, unless the segment’s operations are primarily of a financial
nature,
• losses on sales of investments or losses on extinguishment of debt unless the segment’s operations are primarily of a financial nature,
• general and administrative expenses and other expenses arising at the level of the Capital Group as a whole, unless they are directly
attributable to the segment and can be allocated to the segment on a reasonable basis.
Segment result is calculated on the level of operating result.
Segment assets are those operating assets that are employed by that segment in operating activity and that are either directly attributable
to the segment or can be allocated to the segment on a reasonable basis. Particularly segment assets do not include assets connected
with income tax.
Sales prices used in transactions between segments are close to market prices.
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3.3.6. Property, plant and equipment
Property, plant and equipment are assets that:
• are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and
• are expected to be used during more than one period (one year or the operating cycle, if longer than one year).
Property, plant and equipment include both fixed assets (assets that are in the condition necessary for them to be capable of operating
in the manner intended by management) as well as construction in progress (assets that are in the course of construction or development
necessary for them to be capable of operating in the manner intended by management).
Property, plant and equipment are initially stated at cost, including grants related to assets. The cost of an item of property, plant and equipment comprises its purchase price, including any costs directly attributable to bringing the asset into use. The cost of an item of property,
plant and equipment includes also the initial estimate of the costs of dismantling and removing the item and restoring the site on which
it is located, the obligation for which is connected with acquisition or construction of an item of property, plant and equipment.
Property, plant and equipment are stated in the statement of financial position prepared at the end of the reporting period at the carrying amount, including grants related to assets. The carrying amount is the amount at which an asset is initially recognised (cost) after
deducting any accumulated depreciation and accumulated impairment losses.
Depreciation of an item of property, plant and equipment begins when it is available for use, ie when it is in the location and condition
necessary for it to be capable of operating in the manner intended by management, over the period reflecting its estimated useful life,
considering the residual value. Fixed assets are depreciated with straight-line method and in justified cases units of production method
of depreciation.
The depreciable amount of an asset is determined after deducting its residual value from the initial value.
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated
separately over the period reflecting its useful life.
The following standard useful lives are used for property, plant and equipment:
Buildings and constructions
10 – 40 years
Machinery and equipment
4 – 35 years
Vehicles and other
2 – 20 years
The depreciation method, the residual value and the useful life of property, plant and equipment are verified at least at the end of each
year. When necessary, the adjustments to depreciation expense are accounted for in next periods (prospectively).
The cost of major inspections and overhaul and replacement components programs is recognised as property, plant and equipment and
depreciated in accordance with their useful lives. The cost of current maintenance of property, plant and equipment is recognised as an
expense when it is incurred.
Property, plant and equipment are tested for impairment, when there are indicators or events that may imply that the carrying amount
of those assets may not be recoverable.
3.3.7. Investment property
An investment property shall be measured initially at its cost. Transaction costs shall be included in the initial measurement. The cost
of a purchased investment property comprises its purchase price and any directly attributable expenditure. Directly attributable expenditure
includes, for example, professional fees for legal services, property transfer taxes and other transaction costs. For internally constructed
investment property the cost is set at the date of construction completion when the asset is brought into use, in accordance with rules
set for property, plant and equipment.
After initial recognition, a Group shall measure all of its investment property at fair value, estimated based on a valuation performed
by and independent expert. Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties
in an arm’s length transaction.
A gain or loss arising from a change in the fair value of investment property shall be recognised in profit or loss for the period in which
it arises. A Group determines fair value without any deduction for transaction costs it may incur on sale or other disposal.
If a Group determines that the fair value of an investment property is not reliably determinable on a continuing basis, the Group shall
measure that investment property at cost in accordance with rules set for property, plant and equipment.
An investment property shall be derecognised on disposal or when the investment property is permanently withdrawn from use and no
future economic benefits are expected from its disposal.
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3.3.8. Intangible assets
An intangible asset is an identifiable non-monetary asset without physical substance. An asset is identifiable if it either:
• is separable, i.e. is capable of being separated or divided from the Capital Group and sold, transferred, licensed, rented or exchanged,
either individually or together with a related contract, identifiable asset or liability, or
• arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the Capital Group
An intangible asset shall be recognised if, and only if:
• it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group, and
• the cost of the asset can be measured reliably.
An intangible asset arising from development (or from the development phase of an internal project) shall be recognised if, and only if,
the Group can demonstrate all of the following:
• the technical feasibility of completing the intangible asset so that it will be available for use or sale,
• its intention to complete the intangible asset and use or sell it,
• its ability to use or sell the intangible asset,
• how the intangible asset will generate probable future economic benefits. Among other things, the Group can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness
of the intangible asset,
• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset,
• its ability to measure reliably the expenditure attributable to the intangible asset during its development.
If the definition criteria of an intangible asset are not met, the cost incurred to acquire or self develop an asset are recognised in profit or
loss when incurred. If an asset was acquired in a business combination it is part of a goodwill as at acquisition date.
An intangible asset shall be measured initially at cost, including grants related to assets. An intangible asset that is acquired in a business
combination, is recognised initially at fair value.
After initial recognition, an intangible asset shall be presented in the financial statements in its net carrying amount, including grants
related to assets.
Intangible assets with finite useful life are amortised using straight-line method. Amortisation shall begin when the asset is available for
use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.
The asset shall be amortised over the period reflecting its estimated useful life.
The depreciable amount of an asset with a finite useful life is determined after deducting its residual value. Excluding particular cases,
the residual value of an intangible asset with a finite useful life shall be assumed to be zero.
The following standard useful lives are used for intangible assets:
Concessions, licenses, patents and similar
2 – 15 years
Software
2 – 10 years
The amortisation method and useful life of intangible asset item are verified at least at the end of each year. When necessary, the adjustments to amortisation expense are accounted for in the future periods (prospectively).
Intangible assets with an indefinite useful life shall not be amortised. Their value is decreased by the eventual impairment allowances.
Additionally, the useful life of an intangible asset that is not being amortised shall be reviewed each period to determine whether events
and circumstances continue to support an indefinite useful life assessment for that asset.
3.3.8.1.Goodwill
Goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer’s cash-generating units,
(or groups of cash-generating units), that is expected to benefit from the synergies of the combination, irrespective of whether other
assets or liabilities of the acquiree are assigned to those units or groups of units.
The acquirer shall recognise goodwill as of the acquisition date measured as: the excess of a) over b) where:
the value of a) corresponds to the aggregate of:
• the consideration transferred, which generally requires acquisition-date fair value,
• the amount of any non-controlling interest in the acquire, and
• in a business combination achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree.
the value of b) corresponds to:
• the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
Occasionally, an acquirer will make a bargain purchase, which is a business combination in which the amount in point (b) exceeds the aggregate of the amounts specified in point (a). If that excess remains, after reassessment of correct identification of all acquired assets and
liabilities, the acquirer shall recognise the resulting gain in profit or loss on the acquisition date as other operating profit for the period.
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The acquirer shall measure goodwill in the amount recognised at the acquisition date less any accumulated impairment allowances.
A cash-generating unit to which goodwill has been allocated shall be tested for impairment annually, and whenever there is an indication
that the unit may be impaired. The annual impairment test may be performed at any time during an annual period, provided the test
is performed at the same time every year.
A cash-generating unit to which no goodwill has been allocated shall be tested for impairment only when there are indicators that
the cash-generating unit might be impaired.
An impairment loss recognised for goodwill shall not be reversed in a subsequent period.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs,
the acquirer shall report in its consolidated financial statements provisional amounts for the items for which the accounting is incomplete.
During the measurement period, the acquirer shall retrospectively adjust the provisional amounts recognised at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected
the measurement of the amounts recognised as of that date. During the measurement period, the acquirer shall also recognise additional
assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date and, if known,
would have resulted in the recognition of those assets and liabilities as of that date. The measurement period ends as soon as the acquirer
receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. However, the measurement period shall not exceed one year from the acquisition date.
3.3.8.2.Rights
Carbon dioxide emission rights (CO2)
By the virtue of The Kyoto Protocol, the countries, which decided to ratify the Protocol, obliged themselves to reduce emissions of greenhouse gases, i.a. carbon dioxide (CO2).
In the European Union countries, the plants and companies, which reach productivity exceeding 20 MW and some other industrial plants
were obliged to participate in emissions trading system. All mentioned entities are allowed to emit CO2 in specified amount and are
obliged to amortise those rights in the amount of the emissions of the given year.
CO2 emission rights are initially recognised as intangible assets, which are not amortised (assuming the high residual value), but tested
for impairment.
Granted emission allowances should be presented as separate items as intangible assets in correspondence with deferred income at fair value
as at the date of registration (grant in scope of IAS 20). Purchased allowances should be presented as intangible assets at purchase price.
For the estimated CO2 emission during the reporting period, a provision should be created in operating activity costs (taxes and charges).
Grants should be recognised on a systematic basis to ensure proportionality with the related costs which the grants are intended to compensate. Consequently, the cost of recognition of the provision in the separate statement of profit or loss and other comprehensive
income is compensated by a decrease of deferred income (grants) with taking into consideration the proportion of the estimated quantity
of emission (accumulated) to the quantity of estimated annual emission.
Granted/purchased CO2 emission allowances are amortised against the book value of provision, as its settlement. Outgoing of allowances
is recognised using FIFO method (First In, First Out) within the individual types of rights (EUA – European Union Allowances, ERU – Emission
Reductions Units, CER – Certified Emission Reduction).
Nitrous suboxide emission reduction units (N2O)
One of the EU mechanisms, which simplify meeting obligations related to the reduction of the greenhouse emission, including i.a. nitrous
suboxide (N2O), is Joint Implementation (JI). Emission Reduction Units (ERUs) are granted to those plants and enterprises, which have
realized the JI projects and limit the gas emission from installations in an effective way.
Recognised units of emission reduction are presented gross as receivables in correspondence with deferred income (grant in scope of IAS
20) at fair value as at the last working day of a monthly period.
At the end of the following month, value of receivables recognised until then is updated to reflect the effects of measurement the unit
of reduction and valuation of total value of units of reduction being the basis for accounting for receivables at fair value as at the end
of the month.
As at the date of registration of emission reduction units in the following period, recognised receivable is settled through recognition
of intangible assets at fair value at that day.
At each period deferred income is also updated.
Grants should be recognised on a systematic basis in the accounting periods. Due to lack of current cost related to granted emission reduction units, income is recognised in the same month as receivables by the settlement of deferred income. Grant is recognised as other
operating income.
Energy rights
The implementation of technologies which use renewable energy sources and the projects in the field of energy conservation are important
activities allowing effectively reduce greenhouse gas emissions.
Energy rights are certificates of origin for electric energy, which are confirmation of electric energy production within licensed renewable
energy sources (RES) or in sources working in combination (in high-efficiency cogeneration), including:
• produced in RES (green energy),
• produced in cogeneration heated with gas fuel or of total installed capacity up to 1 MW (yellow energy),
• produced in cogeneration heated with methane or gas obtained from biomass processing (violet energy),
• produced in other highly effective cogeneration units (red energy).
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All energy companies that sell electricity to end-users are obliged to obtain certificates of origin and submit them for amortization or pay
replacement fee.
Granted free of charge rights should be presented as separate items as intangible assets in correspondence with deferred income at fair
value as at the date of registration (grant in scope of IAS 20).
Purchased energy rights should be presented as intangible assets at purchase price.
For the estimated amount of rights which are need to amortisation during the reporting period, a provision should be created as an
adjustment of energy sales revenues.
Grants should be recognised on a systematic basis to ensure proportionality with the related amount of produced energy, thanks to which
the rights were obtained. The settlement of the grant is recognized as other operating revenue.
3.3.8.3. Perpetual usufruct of land
Acquired perpetual usufruct of land is recognised at the acquisition cost and presented in a separate line of the statement of financial position.
As at the end of the reporting period perpetual usufruct of land is valued at the net carrying amount, i.e. at the acquisition cost less any
accumulated depreciation and impairment losses.
Perpetual usufruct of land received based on administrative decision are recognised only off balance sheet.
Perpetual usufruct of land are treated as operating leases.
3.3.9. Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost
of that asset. Other borrowing costs are regonised as an expense.
A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
Borrowing costs are capitalized based on so called net investment expenditures which means assets in the process of construction not
funded through the use of investment commitments, but using other sources of external financing. Borrowing costs may include:
• interest expense calculated using the effective interest method as described in IAS 39 Financial Instruments: Recognition and Measurement,
• finance charges in respect of finance leases recognised in accordance with IAS 17 Lease, and
• exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
Upper limit of the borrowing cost eligible for capitalization is the value of borrowing cost actually born by the entity.
The commencement date for capitalization is the date when all of the following three conditions are met:
• expenditures for the asset are incurred,
• borrowing costs are incurred,
• activities necessary to bring the asset into its intended use or sale are undertaken.
Capitalising of borrowing costs is ceased when substantially all the activities necessary to prepare the qualifying asset for its intended use
or sale are complete. Necessity to perform additional administrative or decoration works or some adaptation requested by the buyer or
user are not the basis for the capitalization.
After putting an asset into use, the capitalized borrowing costs are depreciated/ amortized over the period reflecting economic useful life
of the asset as part of the cost of the asset.
3.3.10. Impairment of assets
If there are external or internal indicators that the carrying amount of an asset as at the end of the reporting period may not be recoverable, the impairment tests are carried out. The tests are carried out also annually for intangible assets with the indefinite useful life and
for goodwill.
When carrying amount of an asset or a cash generating unit exceeds its recoverable amount, the carrying amount is decreased to the recoverable amount by an adequate impairment allowance charged against cost in profit or loss. The recoverable amount of an asset or
a cash-generating unit is the higher of its value in use and its fair value less costs to sell.
Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit.
Fair value less costs to sell is the amount obtainable from the sale of an asset or cash-generating unit in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.
Assets that do not generate the independent cash flows are grouped on the lowest level on which cash flows, independent from cash
flows from other assets, are generated (cash generating units). Following assets are allocated to the cash generating unit:
• goodwill, if it may be assumed, that the cash generating unit benefited from the synergies associated to a business combination with
another entity,
• corporate assets, if they may be allocated on a reasonable and coherent basis.
The impairment loss shall be allocated to reduce the carrying amount of the assets of the unit in the following order:
• first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit,
• then, to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.
At the end of each annual reporting period an assessment shall be made whether an impairment loss recognised in prior periods for
an asset shall be partly or completely reversed. Indications of a potential decrease in an impairment loss mainly mirror the indications
of a potential impairment loss in prior periods.
Reversal of an impairment loss is recognised in profit or loss.
An impairment loss recognised for goodwill shall not be reversed.
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3.3.11. Inventories
Inventories are assets:
• held for sale in the ordinary course of business,
• in the process of production for such sale, or
• in the form of materials or supplies to be consumed in the production process or in the rendering of services.
Inventories comprise products, semi-finished products and work in progress, merchandise and materials.
Finished goods, semi-finished products and work in progress are measured initially at production cost. Production costs include costs
of materials and costs of conversion for the production period. Costs of production include also a systematic allocation of fixed and variable production overheads estimated for normal production level.
The production costs do not include:
• costs incurred as a consequence of low production or production losses,
• general and administrative expenses that are not directly attributable to bringing the inventories to the condition and location at the moment of measurement,
• storage costs of finished goods, semi-finished products and work in progress, unless these costs are necessary in the production process,
• distribution expenses.
Finished goods, semi-finished products and work in progress shall be measured at the end of the reporting period at the lower of cost
and net realisable value, after deducting any impairment losses.
Outgoings of finished goods, semi-finished products and work in progress is determined based on the weighted average cost formula,
the cost of each item is determined from the weighted average of the cost of similar items produced during the reporting period.
Merchandise and materials are measured initially at acquisition cost.
As at the end of the reporting period merchandise and raw materials are measured at the lower of cost and net realizable value, considering any impairment allowances.
Outgoings of merchandise and raw materials is determined based on the weighted average acquisition cost or production cost formula.
Impairment tests for specific items of inventories are carried out on a current basis during an annual reporting period. Write-down to net
realizable value concerns inventories that are damaged or obsolete.
Raw materials held for use in the production are not written down below acquisition or production cost if the products in which they
will be incorporated are expected to be sold at or above cost. However, when a decline in the price of materials indicates that the cost
of the products exceeds net realizable value, the materials are written down to net realizable value.
3.3.12. Receivables
Receivables, including trade receivables, are recognised initiallyat fair value increased by transaction costs and subsequently at amortized
cost using the effective interest method less impairment allowances.
3.3.13. Cash and cash equivalents
Cash comprises cash on hand and in a bank account. Cash equivalents are short-term highly liquid investments (of initial maturity up
to three months), that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
The cash equivalents are rather part of the cash management process implemented by the entity nor investment or other.
Valuation and outflows of cash and cash equivalents in foreign currencies are based on FIFO (first in first out) method.
3.3.14. Non-current assets held for sale and discontinued operations
Non-current assets held for sale are those which comply simultaneously with the following criteria:
• the sales were declared by the appropriate level of management,
• the assets are available for an immediate sale in their present condition,
• an active program to locate a buyer has been initiated,
• the sale transaction is highly probable and can be settled within 12 months following the sales decision,
• the selling price is reasonable in relation to its current fair value,
• it is unlikely that significant changes to the sales plan of these assets will be introduced.
The classification of asset into this category is made in the reporting period when the classification criteria are met. If the criteria for classification of a non-current asset as held for sale are met after the reporting period, an entity shall not classify a non-current asset as held
for sale in those financial statements when issued.
While a non-current asset is classified as held for sale it shall not be depreciated (or amortised).
A non-current assets held for sale (excluding financial assets) shall be measured at a lower of: book value or fair value less costs to sell.
A gain is recognised for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the cumulative impairment
loss that has been previously recognised.
3.3.15. Equity
Equity is recorded in accounting books by type, in accordance with legal regulations and the Parent Company’s articles of association.
Equity comprises:
3.3.15.1.Share capital
The share capital is an equity paid by shareholders and is stated at nominal value in accordance with the Parent Company’s articles of association and the entry in the Commercial Register.
Declared but not paid share capital is presented as outstanding share capital contributions. The Parent Company’s own shares and outstanding shares capital contributions decrease the equity.
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3.3.15.2.Share premium
Share premium is created by the surplus of the issuance value in excess of the nominal value of shares decreased by issuance costs. Issuance
costs incurred by setting up a Parent Company or increasing the share capital decrease the share premium to the amount of the surplus
of the issuance value in excess of the nominal value of shares, and the remaining portion is presented in retained earnings.
3.3.15.3.Hedging reserve
Hedging reserve relates to valuation and settlement of hedging instruments that meet the criteria of cash flow hedge accounting.
3.3.15.4.Revaluation surplus
Revaluation surplus comprises revaluation of items, which, according to the company’s regulations, relates to the revaluation surplus,
including particularly:
• change of the fair value of the available-for-sale financial assets.
• differences between the net book value and the fair value of the investment property at the date of reclassification from the property
occupied by the Group to the investment property.
3.3.15.5.Foreign exchange differences on subsidiaries from consolidation
Foreign exchange differences on subsidiaries from consolidation result mainly from translation of financial statements of subsidiaries into
functional and presentation currency of the Group.
3.3.15.6.Retained earnings
Retained earnings include:
• the amounts arising from profit distribution/loss cover,
• the undistributed result for prior periods,
• the current period profit/loss,
• the effects (profit/loss) of prior period errors,
• changes in accounting principles,
• other reserve capital as additional payments to equity.
Non repayable additional payments to equity with non-confirmed repayment date are presented in equity of receiving entity with a corresponding entry as investment in shares of entity making the additional payments.
Repayable additional payments to equity are presented in entity receiving payment as current or non-current liabilities based on the repayment date. Repayable additional payments to equity are presented as current or non-current receivables in entity transferring payment
based on the repayment date i.e. up to 12 months as current and above 12 months as non-current, initially recognized at fair value.
3.3.16. Liabilities
Liabilities, including trade liabilities, are initialy stated at fair value increased by transaction cost and subsequently amortized cost using
the effective interest method.
3.3.16.1. Accruals
Accruals are liabilities due for goods or services received/provided, but not paid, invoiced or formally agreed with the seller, together with
amounts due to employees.
Although it is sometimes necessary to estimate the amount or timing of accruals, the uncertainty is generally much lower than it is for
provisions.
3.3.17. Provisions
A provision is a liability of uncertain timing or amount.
The Capital Group recognises a provision when it has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be
made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period.
The provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable
that an outflow of resources embodying economic benefits will be required to settle the obligation the provision is reversed. The provision
is used only for expenditures for which the provision was originally recognized.
When the effect of the time value of money is material, the amount of the provision is the present value of the expenditure expected to be
required to settle the obligation. If the discounting method is applied, the increase of provisions with time is recognised as financial expenses.
Provisions are not recognised for the future operating losses.
The provisions are created, among others, for (if the conditions of the reserve recognition listed above are met):
• environmental risk,
• jubilee bonuses and post-employment benefits,
• business risk,
• shield programs,
• CO2 emissions.
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3.3.17.1.Environmental provision
The Capital Group creates provisions for future liabilities due to reclamation of contaminated land or water or elimination of harmful substances if there is such a legal or constructive obligation. Environmental provision for reclamation is periodically reviewed based on reports
prepared by independent experts. The Capital Group conducts regular reclamation of contaminated land that decreases the provision
by its utilization.
3.3.17.2.Jubilee bonuses and post employment benefits
Under the remuneration plans employees are entitled to jubilee bonuses as well as retirement and pension benefits.
The jubilee bonuses are paid to employees after elapse of a defined number of years in service. The retirement (pension) benefits are paid
once at retirement (pension). The amount of retirement and pension benefits as well as jubilee bonuses depends on the number of years
in service and an employee’s average remuneration.
The jubilee bonuses are other long-term employee benefits, whereas retirement and pension benefits are classified as post-employment
defined benefit plans.
The provision for jubilee bonuses, retirement and pension benefits is created in order to allocate costs to relevant periods.
The provisions equal to the present value of these liabilities are estimated at the end of each reporting year by an independent actuary
and adjusted if there are any material indications impacting the value of the liabilities. The recognized provisions equal discounted future
payments, considering the demographic and financial assumption including employee rotation, planned increase of remuneration and
relate to the period ended at the last day of the reporting year.
3.3.17.3.Business risk
Business risk provision is created after consideration of all available information, including opinions of independent experts.
If on the basis of such information it is more likely than not that a present obligation exists at the end of the reporting period, the Group
recognises a provision (if the recognition criteria are met).
If it is more likely that no present obligation exists at the end of the reporting period, the Group discloses a contingent liability, unless
the possibility of an outflow of resources embodying economic benefits is remote.
3.3.17.4. Shield programs
Shield programs provision (restructuring provision) is created when the Capital Group started to implement the restructuring plan or
announced the main features of the restructuring plan to those affected by it in a sufficiently specific manner to raise a valid expectation in them that the restructuring will be carried out. A restructuring provision shall include only the direct expenditures arising from
the restructuring, i.e. connected with the termination of employment (paid leave payments and compensations), termination of lease
contracts, dismantling of assets.
3.3.17.5. CO2 emissions costs
The Company creates provision for the estimated CO2 emission during the reporting period in operating activity costs (taxes and charges).
3.3.18. Goverment grants
Government grants are transfers of resources to the Capital Group by government, government agencies and similar bodies whether local,
national or international in return for past or future compliance with certain conditions relating to the activities of the entity.
Government grants shall not be recognised until there is reasonable assurance that the grants will be received and the entity will comply
with the conditions attaching to them.
Grants related to costs are presented as compensation to the given cost at the period they are incurred. The surplus of the received grant
over the value of the given cost is presented as other operating income.
Government grants related to assets, shall be presented net with the related asset and is recognised in profit or loss on a systematic basis
over the useful life of the asset through the decreased depreciation charges.
3.3.19. Revenues from sale
Revenues from sale (from operating activity) comprise revenues that relate to core activity, i.e. activity for which the Capital Group was
founded, revenues are recurring and are not of incidental character.
3.3.19.1.Revenues from sales of finished goods, merchandise, materials and services
Revenues from sales of finished goods, merchandise, materials and services are recognised when the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the sale transaction will flow to the Capital Group and the costs
incurred or to be incurred in respect of the transaction can be measured reliably. Revenues from sale of finished goods, merchandise, raw
materials and services are recognised when the Capital Group has transferred to the buyer the significant risks and rewards of ownership
of the goods and the Capital Group retains neither continuing managerial involvement to the degree usually associated with ownership
nor effective control over the goods sold.
Revenues include received or due payments for delivered goods or services rendered decreased by the amount of any trade discounts,
value added tax (VAT), excise tax and fuel charges.Revenues are measured at fair value of the received or due payments. Revenues realized
on settlement of financial instruments hedging cash flows adjust revenues from sale of finished goods, merchandise, materials and services.
Revenues and expenses relating to services for which the start and end dates fall within different reporting periods are recognised based
on the percentage of completion method, if the outcome of a transaction can be measured reliably, i.e. when total contract revenue can
be measured reliably, it is probable that the economic benefits associated with the contract will flow to the Capital Group and the stage
of completion can be measured reliably.If those conditions are not met, revenues are recognised up to the cost incurred, but not greater
than the cost which are expected to be recovered by the Capital Group.
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3.3.19.2. Revenues from licenses, royalties and trade mark
Revenues from licences, royalties and trade mark arise from the use of entity’s assets by other business entities.
Revenues from licenses, royalties and trade mark are recognised on an accrual basis in accordance with the substance of the relevant
agreements. Prepayments, referring to agreements concluded in the current period by the Capital Group are recognised as deferred income
and settled in the periods when economic benefits are realized according to the agreements.
3.3.19.3.Franchise revenues
Franchise revenues arising from delivery to acquire the right to the contract matter, provides the purchasing side with those rights as a result of the franchise agreement.
Franchise revenues are recognised in accordance with the substance of the relevant agreement, in a way reflecting the reason of charging
with franchise fees, e.g. fixed charges recognized as the services are being provided or as the rights are being exercised, while sold assets
after their delivery or after transferring the title deed.
3.3.20. Costs
Costs (relating to operating activity) comprise costs that relate to core activity, i.e. activity for which the Capital Group was founded, costs
are recurring and are not of incidental character. Particularly costs that are connected to purchase of raw materials, their processing and
distribution, that are fully under Capital Group’s control.
3.3.20.1.Cost of sales
Cost of sales comprises costs of finished goods, merchandise and raw materials sold, including services of support functions.
3.3.20.2.Distribution expenses
Distribution expenses include selling brokerage expenses, trading expenses, advertising and promotion expenses as well as distribution
expenses.
3.3.20.3.General and administrative expenses
General and administrative expenses include expenses relating to management and administration of the Capital Group as a whole.
3.3.21. Other operating revenues and expenses
Other operating revenues refer to operating revenues, in particular relating to profit from liquidation and sale of non-financial non-current
assets, surplus of assets, return of court fees, penalties earned by the Company, surplus of grants received to revenues over the value
of costs, assets received free of charge, reversal of receivable impairment allowances and some provisions, compensations earned, revaluation gains and profit on sale of investment property.
Other operating expenses refer to expenses, in particular relating to loss on liquidation and sale of non-financial non-current assets, shortages of assets, court fees, contractual penalties and fines, penalties for non-compliance with environmental protection regulations, cash
and tangible assets transferred free of charge, impairment allowances (except those that are recognised as financial expenses), compensations paid, write-off of construction in progress which have not produced the desired economic effect, cost of recovery of receivables
and liabilities, revaluation losses and loss on sale of investment property.
3.3.22. Financial revenues and expenses
Financial revenues include, in particular, profit from the sale of shares and other securities, dividends received, interest earned on cash
in bank accounts, term deposits and loans granted, increase in the value of financial assets and foreign exchange gains.
Revenues from dividends are recognised when the shareholders’ right to receive payments is established.
Financial expenses include, in particular, the loss on the sale of shares and securities and expenses associated with such sale, impairment
losses relating to financial assets such as shares, securities and interest, foreign exchange losses, interest on own bonds and other securities issued, interest on finance lease, commissions on bank loans, borrowings, guarantees.
3.3.23. Income tax expenses
Income tax expense comprises current tax and deferred tax.
Current tax is determined in accordance with the relevant tax law based on the taxable profit for a given period.
Tax liabilities for current and prior periods represent the amounts payable at the reporting date. If the amount of the current and prior
periods income tax paid exceeds the amount due the excess is recognised as a receivable.
Deferred tax assets are recognised for deductible temporary differences, unrealized tax losses and unrealized tax relieves.Deferred tax
liabilities are recognised for taxable temporary differences.
Deductible temporary differences are temporary differences that will result in reducing taxable amounts of future periods when the carrying amount of the asset or liability is recovered or settled. Deductible temporary differences arise when the carrying amount of an asset
is lower than its tax base or when the carrying amount of a liability is higher than its tax base. Deductible temporary differences may also
arise in connection with items not recognised in the accounting records as assets or liabilities.
Taxable temporary differences are temporary differences that will result in increasing taxable amounts of future periods when the value
of the asset or liability is recovered or settled.
Taxable temporary differences arise when the carrying amount of an asset at the end of reporting period is higher than its tax base or
when the carrying amount of a liability is lower than its tax base. Taxable temporary differences may also arise in connection with items
not recognised in the accounting records as assets or liabilities.
The measurement of deferred tax liabilities and deferred tax assets shall reflect the tax consequences that would follow from the manner
in which the entity expects to recover or settle the carrying amount of its assets and liabilities.
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If the transaction is not a business combination, and affects neither accounting profit nor taxable profit (loss), an entity would not recognise
the resulting deferred tax liability or asset arising on initial recognition of an asset or liability.
No deferred tax liability is recognised on goodwill, amortisation of which is not a tax deductible expense.
Deferred tax assets and liabilities shall be measured at the end of each reporting period at the tax rates that are expected to apply
to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted by the end of the reporting period.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized (impairment analysis of deferred tax assets at each reporting date).
Deferred tax assets and liabilities are not discounted.
Deferred tax assets and liabilities relating to transactions settled directly in equity are recognised in equity.
Deferred tax assets and liabilities are accounted for as non-current assets or non-current liabilities.
Deferred tax assets and liabilities are offset in the statement of financial position, if the Company has a legally enforceable right to set off
the recognised amounts. It is assumed that a legally enforceable right exists if the amounts concern the same tax payer (including capital
tax group), except for amounts taxed based on lump sum method or in a similar way, if tax law does not allow to offset them with tax
determined according to general rules.
3.3.24. Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for a given period which is attributable to ordinary shareholders
of the Parent Company by the weighted average number of ordinary shares outstanding during the period.
For the purpose of calculating diluted earnings per share, an entity shall adjust profit and the weighted average number of shares outstanding, for the effects of all dilutive potential ordinary shares. Profit or loss attributable to ordinary shareholders of the Parent Company
is increased by the after-tax amounts of dividends and interest for the period, attributable to the dilutive potential ordinary shares adjusted
by all other changes of income and expense, which would result from the change of dilutive ordinary shares.
The weighted average number of ordinary shares outstanding during the period is the number of ordinary shares outstanding at the beginning of the period, adjusted by the number of ordinary shares bought back or issued during the period multiplied by a time-weighting
factor. The time-weighting factor is the number of days that the shares are outstanding as a proportion of the total number of days
in the period; a reasonable approximation of the weighted average is adequate in many circumstances.
For the purpose of calculating diluted earnings per share, the number of ordinary shares shall be the weighted average number of ordinary
shares, plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary
shares into ordinary shares.
Potential ordinary shares shall be treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings
per share or increase loss per share from continuing operations.
3.3.25. Consolidated statement of cash flows
The statement of cash flows is prepared using indirect method.
Cash and cash equivalents presented in the statement of cash flows include cash and cash equivalents less bank overdrafts, if they form
an integral part of the Company’s cash management.
The Capital Group discloses components of cash and cash equivalents and reconciliation between amounts disclosed in the statement
of cash flows and respective lines of statement of financial position.
Non-cash transactions are excluded from statement of cash flows.
Dividends received are presented in cash flows from investing activities.
Dividends paid are presented in cash flows from financing activities.
Interest received from finance leases, loans granted, short-term securities and cash pooling system are presented in cash flows from investing activities. Other interest received are presented in cash flows from operating activities.
Interest paid and provisions on bank loans and borrowings received, cash pool facility, debt securities issued and finance leases are presented
in cash flows from financing activities. Other interest paid are presented in cash flows from operating activities.
Cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short are reported
on a net basis in the statement of cash flows.
Cash received or paid due to term agreements i.a. futures, forward, options, swap is presented in cash flows from investing activities,
unless the agreements are held by the Capital Group for trading or cash received or paid is presented in financing activities.
If the contract is accounted as hedge of a given position, cash flows from such contract are classified in the same way as the cash flows
resulting from the position hedged.
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3.3.26. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
3.3.26.1.Recognition and derecognition in the consolidated statement of financial position
The Capital Group recognises a financial asset or a financial liability in its statement of financial position when, and only when, the Company
becomes a party to the contractual provisions of the instrument.
A regular way purchase or sale of financial assets is recognised by the Company as at trade date.
The Capital Group derecognises a financial asset from the statement of financial position when, and only when:
• the contractual rights to the cash flows from the financial asset expire, or
• it transfers the financial asset to another party.
The Capital Group derecognises a financial liability (or part of financial liability) from its statement of financial position when, and only
when it is extinguished – that is when the obligation specified in the contract:
• is discharged, or
• is cancelled, or
• expired.
3.3.26.2.Measurement of financial assets and liabilities
When a financial asset or liability is recognised initially, the Capital Group measures it at its fair value plus, in the case of a financial asset or a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue
of the financial asset. Transaction costs comprise particularly fees and commissions paid to agents (including employees acting as selling
agents), advisers, brokers and dealers, levies by regulatory agencies and security exchanges and transfer of taxes and duties. Transaction
costs do not include debt premiums or discounts, financing costs or internal administrative or holding costs.
For the purpose of measuring a financial asset at the end of the reporting period or any other date after initial recognition, the Capital
Group classifies financial assets into the following four categories:
• financial assets at fair value through profit or loss,
• held-to-maturity investments,
• loans and receivables,
• available-for-sale financial assets.
Regardless of characteristics and purpose of a purchase transaction, the Capital Group classifies initially selected financial assets as financial
assets at fair value through profit or loss, when doing so results in more relevant information.
A financial asset at fair value through profit or loss is a financial asset that has been designated by the Capital Group upon initial recognition as at fair value through profit or loss or classified as held for trading if it is:
• acquired principally for the purpose of selling or repurchasing in the near term, or
• part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual
pattern of short-term profit making, or
• a derivative (except for a derivative that is an effective hedging instrument).
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Capital
Group has the positive intention and ability to hold to maturity.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market.
Available-for-sale financial assets are those non-derivative financial assets that are designated by the Capital Group as available for sale or
are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.
3.3.26.2.1. Fair value measurement of financial assets
The Capital Group measures financial assets at fair value through profit or loss, including derivative financial assets and available-for-sale
financial assets at their fair value, without any deduction for transaction costs that may be incurred on sale or other disposal.
Fair value of financial assets is determined in the following way:
• for instruments quoted on an active market based on current quotations available as at the end of the reporting period,
• for debt instruments unquoted on an active market based on discounted cash flows analysis,
• for forward and swap transactions based on discounted cash flows analysis.
If the fair value of investments in equity instruments (shares) that do not have a quoted market price on an active market is not reliably
measurable, the Capital Group measures them at cost, that is the acquisition price less any accumulated impairment losses.
Financial assets designated as hedging items are measured in accordance with the principles of hedge accounting.
A gain or loss on a financial asset classified as at fair value through profit or loss are recognised through profit or loss.
A gain or loss on an available-for-sale financial asset are recognised in other comprehensive income, except for impairment losses and
foreign exchange gains and losses that are recognised in profit or loss.
In case of debt financial instruments interest calculated using the effective interest method are recognised in profit or loss.
3.3.26.2.2. Amortized cost measurement of financial assets
The Capital Group measures loans and other receivables, including trade receivables, as well as held-to-maturity investments at amortized
cost using the effective interest method. Effective interest is the rate which precisely discounts estimated future cash flows or payments
made in expected periods until financial instrument expiration, and in grounded situations in shorter period, up to net book value of asset of financial liability.
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3.3.26.2.3. Fair value measurement of financial liabilities
As at the end of the reporting period or other dates after the initial recognition the Capital Group measures financial liabilities at fair
value through profit or loss (including particularly derivatives which are not designated as hedging instruments) at fair value. Regardless
of characteristics and purpose of a purchase transaction, the Capital Group classifies initially selected financial liabilities as financial liabilities
at fair value through profit or loss, when doing so results in more relevant information. The fair value of a financial liability is the current
price of instruments quoted on an active market.
If there is no active market for a financial instrument, the fair value of the financial liabilities is established by using the following techniques:
• using recent arm’s length market transactions between knowledgeable, willing parties,
• reference to the current fair value of another instrument that is substantially the same,
• discounted cash flow analysis.
3.3.26.2.4. Amortized cost measurement of financial liabilities
The Capital Group measures other financial liabilities at amortized cost using the effective interest rate method.
Financial guarantee contracts, that are contracts that require the Capital Group (issuer) to make specified payments to reimburse the holder
for the loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt
instrument, not classified as financial liabilities at fair value through profit or loss are measured at the higher of:
• the amount determined in accordance with principles relating to valuation of provisions,
• the amount initially recognised less, when appropriate, cumulative amortization.
3.3.26.3.Transfers
The Capital Group:
• shall not reclassify a financial instrument, including derivative, into or out of fair value through profit or loss category while it is held or
issued, if at initial recognition it has been designated by the Capital Group as measured at fair value through profit and loss, and
• may, if a financial asset is no longer held for the purpose of selling or repurchasing it in the near term (notwithstanding that the financial asset may have been acquired or incurred principally for the purpose of selling or repurchasing it in the near term), reclassify that
financial asset out of the fair value through profit or loss category in limited circumstances. In case of loans and receivables (if at initial
recognition financial assets was not classified at held for trading) a financial asset can be reclassified out of fair value through profit or
loss category, if an entity has intention and possibility to hold a financial asset in a foreseeable future or to maturity.
3.3.26.4.Impairment of financial assets
The Capital Group assesses at the end of each reporting period whether there is any objective indicator that a financial asset or group
of financial assets is impaired.
If there is an objective indicator that an impairment loss on loans and other receivables or held-to-maturity investments carried at amortized
cost has been incurred, the amount of the loss is measured at the difference between the asset’s carrying amount and the present value
of estimated future cash flows discounted at the financial asset’s original effective interest rate (i.e. effective interest rate determined
at initial recognition).
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised, the previously recognised impairment loss is reversed and recognised in profit or loss as revenue.
If there is an objective indicator that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value
because its fair value cannot be reliably measured, the amount of the impairment loss is measured as the difference between the carrying
amount of the financial assets and the present value of estimated future cash flows discounted at the current market rate of return for
a similar financial asset. Such impairment losses are not reversed.
If there is an objective indicator that an impairment loss has been incurred on an available-for-sale financial asset, the cumulative loss that
had been recognised in statement of comprehensive income is removed from equity and recognised in profit or loss.
Impairment losses for an investment in an equity instrument classified as available for sale are not reversed through profit or loss.
If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively
related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, with the amount
of the reversal recognised in profit or loss.
3.3.26.5. Embedded derivatives
A derivative is a financial instrument with all three of the following characteristics:
• its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange
rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract,
• it requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that
would be expected to have a similar response to changes in market factors, and
• it is settled at a future date.
If the Capital Group is a party of a hybrid (combined) instrument that includes an embedded derivative, the embedded derivative is separated from the host contract and accounted for as a derivative in accordance with principles defined for investments at fair value through
profit or loss if all of the following conditions are met:
• the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks
of the host contract,
• a separate instrument with the same realization terms as the embedded derivative would meet the definition of a derivative, and
• the hybrid (combined) instrument is not measured at fair value with changes in fair value recognised in statement of comprehensive
income (i.e. a derivative that is embedded in a financial asset or financial liability at fair value through profit or loss is not separated).
The Capital Group assesses the need to separate an embedded derivative from the host contract and to present it as a derivative, when
it becomes a party of a hybrid instrument for the first time. Reassessment is made only in case, when subsequent changes are introduced
to the hybrid contract that substantially modify cash flows required by the contract.
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3.3.26.6.Hedge accounting
Derivatives designated as hedging instruments whose fair value or cash flows are expected to offset changes in the fair value or cash flows
of a hedged item are accounted for in accordance with fair value or cash flow hedge accounting, if all of the following conditions are met:
• at the inception of the hedge there is formal designation and documentation of the hedging relationship and the Capital Group’s risk
management objective and strategy for undertaking the hedge,
• the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk,
consistently with the originally documented risk management strategy for that particular hedging relationship,
• for cash flow hedges, a forecast transaction that is the subject of the hedge must be highly probable and must present an exposure
to variations in cash flows that could ultimately affect profit or loss,
• the effectiveness of the hedge can be reliably measured,
• the hedge is assessed on an ongoing basis and determined actually to have been highly effective throughout the financial reporting
periods for which the hedge was designated.
The Capital Group does not apply hedge accounting in case when embedded derivative instrument is separated from the host contract.
The Capital Group assess effectiveness at the inception of the hedge and later, at minimum, at each reporting date. The Capital Group
assess hedge as effective, for external reporting purposes only if the actual results of the hedge are within a range of 80% – 125%.
The Capital Group uses statistical methods, in particular regression analysis, to assess effectiveness of the hedge. The Capital Group uses
simplified analytical methods, when a hedged item and a hedging instruments are of the same nature i.a. maturity dates, amounts, changes
affecting fair value risk or cash flow changes.
Fair value hedge is a hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm commitment,
or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or
loss. A firm commitment is a binding agreement for the exchange of a specified quantity of resources at a specified price on a specified
future date or dates.
If a fair value hedge is used, it is accounted for as follows:
• the gain or loss from remeasuring the hedging instrument at fair value is recognised in profit or loss, and
• the gain or loss on the hedged item attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognised
in profit or loss (this applies also if the hedged item is an available-for-sale financial asset, whose changes in value are recognised in other
comprehensive income).
The Capital Group discontinues fair value hedge accounting if:
• the hedging instrument expires, is sold, terminated or exercised (for this purpose, the replacement or rollover of a hedging instrument
into another hedging instrument is not an expiration or termination if such replacement or rollover is part of the Company’s documented
hedging strategy),
• the hedge no longer meets the criteria for hedge accounting, or
• the Company revokes the designation.
Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised
asset or liability or a highly probable forecast transaction and could affect profit or loss. A forecast transaction is an uncommitted but
anticipated future transaction.
If a cash flow hedge is used, it is accounted for as follows:
• the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income, and
• the ineffective portion of the gain or loss on the hedging instrument is recognised in profit or loss.
If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains
or losses that were recognised in other comprehensive income are reclassified to profit or loss in the same period or periods during which
the asset acquired or liability assumed affect profit or loss. However, if the Capital Group expects that all or a portion of a loss recognised
in other comprehensive income will not be recovered in one or more future periods, it reclassifies to profit or loss the amount that is not
expected to be recovered.
If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, or a forecast
transaction for a non-financial asset or non-financial liability becomes a firm commitment for which fair value hedge accounting is applied,
the Capital Group removes the associated gains and losses that were recognised in the other comprehensive income and includes them
in the initial cost or other carrying amount of the asset or liability.
The Group discontinues cash flow hedge accounting if:
• the hedging instrument expires, is sold, terminated or exercised – in this case, the cumulative gain or loss on the hedging instrument
recognised in other comprehensive income remain separately recognised in equity until the forecast transaction occurs,
• the hedge no longer meets the criteria for hedge accounting – in this case, the cumulative gain or loss on the hedging instrument
recognised in other comprehensive income remain separately recognised in equity until the forecast transaction occurs,
• the forecast transaction is no longer expected to occur, in which case any related cumulative gain or loss on the hedging instrument
recognised in other comprehensive income are recognised in profit or loss,
• the designation is revoked – in this case the cumulative gain or loss on the hedging instrument recognised in other comprehensive income
remain separately recognised in other comprehensive income until the forecast transaction occurs or is no longer expected to occur.
Net investment in a foreign operations is the amount of the reporting entity’s interest in the net assets of that operations.
Hedges of a net investment in a foreign operations, including hedge of monetary item that is accounted for as a part of the net investment, shall be accounted for similarly to cash flow hedges:
• the portion of the gain or loss on the hedging instrument that is determined to be effective hedge shall be recognised in other comprehensive income, and
• the ineffective portion shall be recognised in profit or loss.
The gain or loss on the hedging instrument relating to the effective portion of the hedge that has been recognised in other comprehensive
income shall be reclassified from equity to profit or loss as a reclassification adjustment on a disposal of the foreign operations.
A hedge of a foreign currency risk of a firm commitment may be accounted for as a fair value hedge or cash flow hedge.
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3.3.27. Lease
A lease is an agreement whereby a lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for
an agreed period of time. Particularly leases are the agreements defined in the Polish Civil Code as well as rent and tenancy agreements
concluded for a definite time.
Assets used under the finance lease, that is the agreement that transfers substantially all the risks and rewards incidental to ownership
of an asset to the lessee, are recognised as assets of the lessee.
Transfer of risks and rewards within the finance lease agreements includes i.e. the following situations:
• the lease transfers ownership of the asset at or by the end of the lease term,
• the lessee has the option to purchase the asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will be exercised,
• the lease term is for the major part of the economic life of the asset even if title is not transferred,
• at the inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fair value
of the leased asset,
• the leased assets are of such a specialised nature that only the lessee can use them without major modifications.
If the Capital Group uses an asset based on the finance lease, the asset is recognised as an item of property, plant and equipment or
an intangible asset. The leased asset is measured at the lower of its fair value or the present value of the minimum lease payments that
is the present (discounted) value of payments over the lease term that the lessee is or can be required to make.
The present value of the minimum lease payments is recognised in the statement of financial position as financial liability with the division
into short and long-term part. The minimum lease payments are discounted and apportioned between finance charge and the reduction of the outstanding liability using interest rate implicit in the lease, that is the discount rate that, at the inception of the lease, causes
the aggregate present value of the minimum lease payments, the unguaranteed residual value to be equal to the sum of the fair value
of the leased asset and the initial direct costs if this is impossible to determine, the lessee’s incremental borrowing rate, that is the rate,
the lessee would have to pay on the similar lease agreement or – if that is not determinable, the rate that, at the inception of the lease,
the lessee would incur to borrow over a similar term, with a similar security, the funds necessary to purchase the leased asset for the similar
period of time and with similar guarantees.
Depreciation methods for assets leased under the finance lease as well as methods of determining impairment losses in respect of assets
leased under the finance lease are consistent with policies applied for the Capital Group’s owned assets. If there is a reasonable uncertainty
that the lessee will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of: the lease term or useful life.
If the Capital Group conveyed to another entity the right to use an asset under the finance lease, the present value of the minimum lease
payments and unguaranteed residual value is recognised in the statement of financial position as receivables with the division into short
and long-term part. The minimum lease payments and unguaranteed residual value are discounted using interest rate implicit in the lease.
Assets used under the operating lease, that is under the agreement that does not transfer substantially all the risks and rewards incidental
to ownership of an asset to the lessee, are recognised as assets of the lessor.
Lease payments from the operating lease are recognised by lessor as revenues from sales of products, while by lessee as costs in profit or loss.
3.3.28. Exploration and extraction of hydrocarbons/salt
Within the framework of exploration and extraction of hydrocarbons/salt activity, the following classification of project stages can be
identified:
• preliminary stage of assessment,
• acquisition of rights to explore and extract,
• exploration of resources,
• recognition of resources,
• resource site planning,
• extraction.
At the stage when the exploration of resources begins, the Capital Group every time defines the cost generating unit, where the costs
are being accumulated at the project level, which, simultaneously, constitutes the cash-generating unit.
All expenditures related to the preliminary stage of assessment (i.e. before the purchase of the concession for the exploration and recognition of resources) are recognised in profit or loss when incurred.
Expenditures related to the stages of acquisition of rights to explore and extract, exploration and recognition of resources are recognized
according to the Successful Efforts Method, i.e. the Group capitalizes only these costs, which meet the definition of assets, in particular,
if there is a probability of generating future economic benefits.
Cost incurred, related to acquisition of rights to explore and extract are recognised as intangible assets. Other expenses that may be directly
attributed to the purchase transaction of exploration rights should increase the purchase price of an asset. If direct allocation of costs
to the purchase transaction of exploration rights is not possible, other costs are recognised in profit or loss when incurred.
Expenditures related to exploration and recognition activities, bore after the purchase of concession for the exploration and recognition
of resources, include:
• expenditures incurred for exploratory drilling is initially recognised within the cost generating unit, defined at the project level and are
presented as construction in progress. if the exploratory and appraisal drilling for the given project (project comprises works with defined
exploratory or/and appraisal objective, which are being conducted on the given area) are unsuccessful, the cost previously recognised
as an asset (including expenditures recognized during the exploration stage) is included in profit or loss. if the appraisal is successful,
the cost incurred for all appraisal drillings (including unsuccessful drillings related to recognized hydrocarbons/salt deposits) is transferred to property, plant and equipment at the date, when the commercial and technical feasibility of a resource is confirmed. in case
of performance exploratory drillings on already extracted resource, the group analyzes, if costs incurred enable rising new boreholes
– expenditures are recognised in non-current assets at the date of put into use. if despite the expenditures, new borehols do not rise,
expenditures are recognised in profit or loss when incurred.
152
• other expenditures at the exploration and recognition stage are initially recognized within the framework of the cost generating unit
defined at the project level and presented as intangible assets under development or construction in progress, depending on the type
of cost incurred. if the exploration and recognition stage ends without success, initially incurred costs, previously recognised as an
asset are included in profit or loss. if the recognition stage ends with success, the expenditures are recognized as property, plant and
equipment or intangible assets (depending on the type of cost incurred), at the date, when the commercial and technical feasibility
of a resource is confirmed.
• other expenses that can be directly attributed to the stage of exploration and recognition should be recognised in the previously defined
cost generating unit. if cost cannot be allocated, it is included in profit or loss when incurred.
Cost incurred for resource site planning are recognised according to the general principles for propery, plant and equipment and intangible
assets, including the scope of borrowing cost in line with the general principles for borrowing cost.
Revenues and cost directly attributed to hydrocarbons/salt resource extraction are included in the profit or loss of the current period. Cost
directly attributed to hydrocarbons/salt resource extraction is recognized in line with general principles for inventories, costs of sales and
sales revenues.
Depreciation/amortisation of property, plant and equipment and intangible assets used for exploration and extraction activity is recognized
in line with general principles for property, plant and equipment and intangible assets by applying the production method, i.e. proportionally to the amount of extracted hydrocarbons/salt. If the application of production method is not possible (e.g. because of the lack of data
connected to the amount of hydrocarbons/salt resources or the applications of assets on several stages of the exploration and excavation
activities) or the application of other depreciation/amortisation method will reflect benefits from the given asset in a more efficient way,
it is possible to apply different depreciation/amortization method, which will reflect the economic wear in the most reliable way.
The Capital Group creates provisions for the cost of removal of drillings and supporting infrastructure, which are recognised and valuated
in line with general principles for provisions.
The amount of the provision for future dismantling and land reclamation is initially recognised as a provision and as a part of initial value
of an asset at the date of put into use. The amount of created provisions is verified at the end of each reporting period and adjusted
to reflect the current knowledge as at that date. The increase in the provision due to the passage of time (due to discounting) is recognised
as a financial expense in the profit or loss. Changes in the provision due to assessment of cost, change of discount rate, change of date
of removal/ reclamation adjust the book value of a provision and book value of an asset.
The Capital Group performs impairment tests of assets used in exploration and extraction activity.
The Capital Group performs impairment tests of assets arising from the purchase of rights, exploration and recognition of hydrocarbons/
salt resources, both for proved and unproved assets/resources on the cash generating unit level, defined as project.
The Capital Group performs impairment tests of assets arising from the presort site planning and excavation of hydrocarbons/salt resources
in line with general principles for impairment of assets.
3.3.29. Contingent assets and contingent liabilities
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Capital group.
Contingent assets are not recognised in the statement of financial position as it may lead to recognition of the income, which will never
be gain. However, if the inflow of economic benefits is probable, the Capital Group discloses respective information on the contingent
asset in the additional information to financial statements and if practicable, estimates the influence on financial results, as according
to accounting principles for valuation of provisions.
Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become
virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognised in the financial statements
of the period in which the change occurs. If an inflow of economic benefits has become probable, an entity discloses the contingent asset.
Contingent liability is:
• a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence
of one or more uncertain future events not wholly within the control of the Capital Group or
• a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligations or the amount of the obligation (liability) cannot be measured with sufficient
reliability.
Contingent liabilities are not recognised in the statement of financial position however the information on contingent liabilities is disclosed
in the financial statements unless the probability of outflow of resources embodying economic benefits is remote.
Contingent liabilities assumed in a business combinations are recognized in the statement of financial position as provisions.
3.3.30. Subsequent events after the reporting date
Subsequent events after the reporting date are those events, favourable and unfavourable that occur between end of the reporting period
and date of when the financial statements are authorized for issue. Two types of subsequent events can be identified:
• those, that provide evidence of conditions that existed as the end of the reporting period (events after the reporting period requiring
adjustments in the foregoing consolidated financial statements) and
•
those that are indicative of conditions that arose after the reporting period (events after the reporting period not requiring
adjustments in the foregoing consolidated financial statements).
153
4. Significant values based on professional judgmement and estimates
The preparation of consolidated financial statements in accordance with IFRSs requires that the Management Board makes expert estimates and assumptions that affect the applied methods and presented amounts of assets, liabilities and equity, revenues and expenses.
The estimates and related assumptions are based on historical expertise and other factors regarded as reliable in given circumstances and
their effects provide grounds for professional judgment of the carrying amount of assets and liabilities which is not based directly on any
other factors.
In the matters of considerable weight, the Management Board might base its judgments estimates or assumption on opinions of independent experts.
The judgments estimates and related assumptions are verified on a regular basis. Changes in accounting estimates are recognised
in the period when they are made only if they refer to that period or in the present and future periods if they concern both the present
and future periods.
Actual results may differ from the estimated values.
4.1. Professional judgement
Financial instruments
The Management Board assesses the classification of financial instruments,nature and extent of risks related to financial instruments and
application of the cash flow hedge accounting. The financial instruments are classified into different categories depending on the purpose
of the purchase and nature of acquired asset. Additional information has been presented in the note 35.
Lease
The Management Board makes judgments of classifying lease agreements as finance or operating lease based on analysis of business
nature. Additional information has been presented in the note 36.
4.2. Uncertainty of estimates
Estimated useful lives of property, plant and equipment and intangible assets
As described in note 3.3.6 and 3.3.8 the Group verifies useful lives of property, plant and equipment and intangible assets at least once
a year. The effect of verification performed in the current reporting year was disclosed in note 7 and 9.
Valuation of investment property
As described in note 3.3.7., the Group, after initial recognition, estimates values of all investment properties at fair value. The fair value
estimation reflects market conditions at the end of the reporting period. Additional information has been presented in note 8.
Impairment of non-current assets
The Management Board assesses whether there is any indicator for impairment of assets or cash generating units. If there is an impairment,
the recoverable amount of an asset or cash generating units is required by determing higher of fair value less costs to sell or value in use
by applying the proper discount rate, depending, which one is higher. Additional information has been presented in note 15.
Impairment of inventories
The Management Board assesses whether there is any indicator for impairment of inventories according to the note 3.3.11. If there is an
impairment, estimation of the net realizable value of inventories, which are damaged or obsolete is required. Additional information has
been presented in note 16.
Impairment of trade and other receivables
The Management Board assesses whether there is any indicator for impairment of trade and other receivables. The estimate of present
value of future cash flow discounted with the initial effective interest rate of receivables is required. Additional information has been
presented in note 17.
Provisions
As described in note 3.3.17., recognition of provisions requires estimates of the probability of outflow of economic benefits and defining
the best estimate of the expenditure required to settle the present obligation at the end of reporting period. Details of applied estimates
and their influence on the foregoing separate financial statements are disclosed in note 23.
Revenue recognition – loyalty program VITAY
For the unrealized and recorded on clients’ accounts VITAY points deferred income is recognized, which adjust retail sales revenues.
Deferred income is estimated based on point share indicators, on which the fuel and non-fuel awards were granted, the number of points
to be realized in the future period and present cost of the VITAY program point. Additional information has been presented in note 26.
Deferred tax assets
Deferred tax assets are recognised according to the note 3.3.23. Recognition of deferred tax assets requires estimate of the projected
dates and of future profits. Additional information has been presented in note 33.2.
Methods of fair value measurement concerning financial instruments
Financial instruments valuation models commonly used by market experts is applied to estimate fair value of financial instruments. Additional
information of applied assumptions and results of sensitivity analysis have been presented in note 35.
Contingent liabilities
As described in note 3.3.29., disclosing of contingent liabilities requires estimate of the probable outflow of economic benefits and defining the best estimate of the expenditure required to settle the present and possible obligation at the end of reporting period. Additional
information has been presented in note 38.
154
5. Entities consolidated using full and proportionate method
ORLEN Capital Group for the years 2012 and 2011 includes PKN ORLEN as Parent Company and entities located in Poland, Germany,
Czech Republic, Lithuania, Malta, Sweden, Holland, Slovakia, Switzerland, Estonia and Latvia. PKN ORLEN is a multi-segment entity, appropriately allocated to all operating segments and corporate functions.
Share in total voting rights
Name of the entity
Parent company 31/12/2012 31/12/2011
Consolidation
method
Website
Refining Segment
Production and trading Companies
AB ORLEN Lietuva (ORLEN Lietuva)
Fabryka Parafin Naftowax Sp. z o.o.
Inowrocławskie Kopalnie Soli
"Solino" S.A.
MOGUL SLOVAKIA s.r.o.
ORLEN Asfalt Sp. z o.o.
1
ORLEN Gaz Sp. z o.o.
ORLEN Oil Cesko s.r.o.
ORLEN OIL Sp. z o.o.
2
ORLEN Paliwa Sp. z o.o.
ORLEN Petrotank Sp. z o.o.
OU ORLEN Eesti (previously
OU Mazeikiu Nafta Trading House)
PARAMO A.S.
ORLEN ASFALT Ceska republika s.r.o.
PKN ORLEN S.A.
100%
100%
full
www.orlenlietuva.lt
RAFINERIA TRZEBINIA S.A.
100%
100%
full
www.naftowax.pl
PKN ORLEN S.A.
100%
98.17%
full
www.solino.pl
PARAMO A.S.
100%
100%
full
PKN ORLEN S.A.
100%
100%
full
www.orlen-asfalt.pl
PKN ORLEN S.A.
100%
100%
full
www.orlengaz.pl
100%
100%
full
www.orlenoil.cz
PKN ORLEN S.A.
100%
100%
full
www.orlenoil.pl
PKN ORLEN S.A.
100%
100%
full
www.
orlenpaliwa.com.pl
PKN ORLEN S.A.
100%
100%
full www.orlenpetrotank.pl
UAB Mezeikiu naftos
prekybos namai
100%
100%
full
UNIPETROL A.S.
100%
100%
full
www.paramo.cz
ORLEN Asfalt Sp. z o.o.
100%
100%
full
www.paramoasfalt.cz
PARAMO OIL s.r.o.
PARAMO A.S.
100%
100%
full
Petrolot Sp. z o.o.
PKN ORLEN S.A.
100%
51%
full
www.petrolot.pl
100%
100%
full
www.platinumoil.pl
www.rnjsa.com.pl
Platinum Oil Sp. z o.o.
Rafineria Nafty Jedlicze S.A.
SIA ORLEN Latvija (previously
SIA Mazeikiu Nafta Tirdzniecibas nams)
UAB Mezeikiu naftos prekybos namai
UNIPETROL RAFINERIE s.r.o
UNIPETROL SLOVENSKO s.r.o.
PKN ORLEN S.A.
100%
89.95%
full
UAB Mezeikiu naftos
prekybos namai
100%
100%
full
AB ORLEN Lietuva
100%
100%
full
UNIPETROL A.S.
100%
100%
full
UNIPETROL RPA s.r.o.
100%
100%
full
www.unipetrol.sk
PKN ORLEN S.A.
86.35%
86.35%
full
www.
rafineria-trzebinia.pl
PKN ORLEN S.A.
56%
56%
full
www.ship-service.pl
UNIPETROL A.S.
51%
51%
proportionate
www.
ceskarafinerska.cz
—
100%
full
RAFINERIA TRZEBINIA
S.A.
100%
100%
full
www.ekonaft.pl
Energomedia Sp. z o.o.
100%
100%
full
www.energomedia.pl
Euronaft Trzebinia Sp. z o.o.
100%
100%
full
www.
euronaft-trzebinia.pl
ORLEN Automatyka Sp. z o.o.
PKN ORLEN S.A.
100%
100%
full
www.
orlenautomatyka.pl
ORLEN Eko Sp. z o.o.
PKN ORLEN S.A.
100%
100%
full
www.orleneko.pl
ORLEN KolTrans Sp. z o.o.
PKN ORLEN S.A.
99.85%
99.85%
full
www.
orlenkoltrans.pl
Rafineria Trzebinia S.A.
Ship-Service S.A.
CESKA RAFINERSKA A.S.
Platinum Oil Małopolskie Centrum
Dystrybucji Sp. z o.o.
3
Service Companies
EkoNaft Sp. z o.o.
155
Name of the entity
ORLEN Transport S.A.
Parent company 31/12/2012 31/12/2011
Consolidation
method
PKN ORLEN S.A.
100%
100%
full
RAF- Służba Ratownicza Sp. z o.o.
RAFINERIA NAFTY JEDLICZE S.A.
100%
100%
full
RAF-BIT Sp. z o.o.
100%
100%
full
RAF-KOLTRANS Sp. z o.o.
100%
100%
full
UAB EMAS
AB ORLEN Lietuva
100%
100%
full
UAB PASLAUGOS TAU
AB ORLEN Lietuva
100%
100%
full
100%
100%
full
UNIPETROL DOPRAVA s.r.o.
Zakładowa Straż Pożarna Sp. z o.o.
Konsorcjum Olejów Przepracowanych
– Organizacja Odzysku S.A
ORLEN Wir Sp. z o.o.
Website
www.
orlentransport.pl
www.raf-bit.pl
100%
100%
full
81%
81%
full
www.konsorcjum.
jedlicze.com.pl
PKN ORLEN S.A.
76.59%
76.59%
full
www.orlenwir.pl
Retail Segment
Segment Trading Companies
AB Ventus-Nafta
AB ORLEN Lietuva
100%
100%
full
BENZINA s.r.o.
UNIPETROL A.S.
100%
100%
full
ORLEN Deutschland GmbH
PKN ORLEN S.A.
100%
100%
full
www.
orlen‑deutschland.de
PKN ORLEN S.A.
100%
100%
full
www.
budonaft.com.pl
BENZINA s.r.o.
100%
100%
full
www.petrotrans.cz
PKN ORLEN S.A.
99.01%
99.01%
full
www.orlencs.pl
PKN ORLEN S.A.
100%
95.14%
full
www.anwil.pl
Basell Orlen
Polyolefins Sp. z.o.o.
100%
100%
full
CHEMAPOL (SCHWEIZ) AG
UNIPETROL A.S.
100%
100%
full
CHEMOPETROL a.s.
UNIPETROL A.S.
100%
100%
full
ANWIL S.A.
100%
100%
full
UNIPETROL AUSTRIA HmbH
UNIPETROL A.S.
100%
100%
full
UNIPETROL DEUTSCHLAND GmbH
UNIPETROL A.S.
100%
100%
full
www.unipetrol.de
UNIPETROL A.S.
100%
100%
full
www.unipetrolrpa.cz
BUTADIEN KRALUPY A.S.
UNIPETROL A.S.
51%
51%
proportionate
Basell Orlen Polyolefins Sp. z o.o.
PKN ORLEN S.A.
50%
50%
proportionate
100%
100%
full
ANWIL S.A.
99.98%
99.98%
full
UNIPETROL A.S.
100%
100%
full
Przedsiebiorstwo Produkcyjno-Handlowo-Usługowe Pro-Lab Sp. z o.o.
ANWIL S.A..
99.32%
99.32%
full
www.prolab.pl
Przedsiębiorstwo Usług Specjalistycznych
i Projektowych Chemeko Sp. z o.o.
ANWIL S.A.
77.96%
55.93%
full
www.chemeko.pl
Service Companies
ORLEN Budonaft Sp .z o.o.
PETROTRANS s.r.o.
ORLEN Centrum Serwisowe Sp. z o.o.
Petrochemical Segment
Production and trading Companies
ANWIL S.A.
Basell Orlen
Polyolefins Sprzedaż Sp. z o.o.
Spolana A.S.
www.spolana.cz
www.basellorlen.pl
Service Companies
POLYMER INSTITUTE BRNO s.r.o.
Przedsiebiorstwo InwestycyjnoRemontowe Remwil Sp. z o.o.
Vyzkumny ustav anorganicke chemie A.S.
156
www.remwil.pl
Name of the entity
Parent company 31/12/2012 31/12/2011
Consolidation
method
Website
Corporate Functions
Service Companies
ORLEN Administracja Sp. z o.o.
PKN ORLEN S.A.
100%
100%
full
www.
orlenadministracja.pl
ORLEN Księgowość Sp. z o.o.
PKN ORLEN S.A.
100%
100%
full
www.
orlenksiegowosc.pl
ORLEN Medica Sp. z o.o.
PKN ORLEN S.A.
100%
100%
full www.orlenmedica.pl
ORLEN Ochrona Sp. z o.o.
PKN ORLEN S.A.
100%
100%
full
ORLEN Projekt S.A.
www.
orlenochrona.pl
PKN ORLEN S.A.
99.63%
51%
UAB Apsauga
ORLEN Ochrona Sp. z o.o.
100%
—
full
www.
orlenapsauga.lt
Sanatorium Uzdrowiskowe
Krystynka Sp. z o.o.
ORLEN MEDICA Sp. z o.o.
98.58%
98.58%
full
www.sanatorium
krystynka.pl
PKN ORLEN S.A.
94.94%
94.94%
full
www.
orlenlaboratorium.pl
PPPT S.A.
69.43%
69.43%
full
www.
centrumedukacji.pl
Unipetrol A.S.
PKN ORLEN S.A.
62.99%
62.99%
full
www.unipetrol.cz
Płocki Park PrzemysłowoTechnologiczny S.A.
PKN ORLEN S.A.
50%
50%
proportionate
www.pppt.pl
Baltic Power Sp. z o.o.
PKN ORLEN S.A.
100%
100%
full www.balticpower.eu
Baltic Spark Sp. z o.o.
PKN ORLEN S.A.
100%
100%
full
ORLEN Finance AB
PKN ORLEN S.A.
100%
100%
full
ORLEN Holding Malta Ltd.
PKN ORLEN S.A.
100%
100%
full
Orlen Holding Malta Ltd.
100%
100%
full
ORLEN International Exploration &
Production Company BV
PKN ORLEN S.A.
100%
100%
full
ORLEN Upstream Sp. z o.o.
PKN ORLEN S.A.
100%
100%
full
AB ORLEN Lietuva
100%
100%
full
UNIPETROL A.S.
100%
100%
full
70.95%
70.95%
full
OIEP Co BV
50%
50%
proportionate
PKN ORLEN S.A.
—
100%
full
ORLEN Laboratorium Sp. z o.o.
Centrum Edukacji Sp. z o.o.
full www.orlenprojekt.pl
Other Companies
Orlen Insurance Ltd.
UAB Medikvita (UAB Mazeikiu naftos
sveikatos prieziuros centras)
UNIPETROL SERVICES s.r.o.
HC VERVA Litvinov A.S.
(prevlously HC Benzina Litvinov A.S.)
SIA Balin Energy
ORLEN Capital AB
www.
orlenupstream.pl
1)
98% share in consolidated financial data.
94% share in consolidated financial data.
share in total voting rights is equal to share in equity, except for share in equity of Capital Group of Ship-Service S.A., where it acounts for 61%.
2) 3)
157
5.1. Changes in Group structure in 2012
Buy-out of non-controlling interest
• Petrolot Sp. z.o.o,
• ANWIL S.A.,
• Inowrocławskie Kopalnie Soli ‘‘Solino” S.A.,
• Rafineria Nafty Jedlicze S.A.,
• ORLEN Projekt S.A.,
• Przedsiębiorstwo Usług Specjalistycznych i Projektowych Chemeko Sp. z o.o.
As the result of above transactions retained earnings were reduced by PLN (17,223) thousand (the difference between the purchase price
of additional shares and the share in company’s equity at the transaction date) and equity attributable to non-controlling interest was
reduced by PLN (154,888) thousand (additional share in entity’s equity at the transaction date). The consolidation method of listed entities didn’t change. Changes in the structure of Rafineria Nafty Jedlicze S.A. Group indirectly influenced percentage stake in consolidated
financial data of ORLEN OIL Sp. z o.o.
The establishment of UAB Aspagua seated in Lithuania by ORLEN Ochrona. The Company is consolidated under full consolidation method
since the date of acquisition.
Sale of shares of ORLEN Capital AB. The result on the transaction was recognized in other operating activities.
Common control transactions, which didn’t have impact on ORLEN Group’s consolidated equity and profit or loss and other comprehensive income
• takeover of PlatinumOil Małpolskie Centrum Dystrybucji Sp. z o.o. by Platinum Oil Sp. z o.o.;
• takeover of ORLEN Asfalt Ceska Republika s.r.o. from UNIPETROL Group to ORLEN Asfalt Group.
158
Explanatory notes to the consolidated financial statements for the year 2012 (all amounts in PLN thousand)
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. Operating segments
Accounting principles used in reportable segments are in line with the accounting principles of the Group, described in note 3.3.5.
The operating segments and corporate functions results are the result generated by respective segments without the allocation of financial
revenues and expenses as well as income tax expenses. The Management Board of PKN ORLEN and management boards of Group companies assess the segment financial results based on operating activity result of the segment (EBIT) and decide about allocation of resources.
Revenues from transactions with external customers and transactions with other segments are carried out at arm’s length. Revenues from
transactions with external customers presented to the Management Board are measured coherently to the method used in the consolidated
statement of profit or loss and other comprehensive income.
6.1. Revenues and financial results by operating segments
Sales revenues from external
customers
Note
Refining
Segment
Retail
Segment
Petrochemical
Segment
Corporate
Functions
Adjustments
Total
29
65,874,900
38,141,303
15,969,168
116,179
—
120,101,550
28,002,151
123,071
3,626,579
223,221
(31,975,022)
—
Sales revenues from
transactions with other
segments
Sales revenues
Operating expenses
93,877,051
38,264,374
19,595,747
339,400
(31,975,022)
120,101,550
(92,343,866)
(37,588,269)
(18,434,512)
(1,097,657)
31,975,022
(117,489,282)
31.1.
331,933
156,777
136,700
101,243
(252)
726,401
31.2.
(938,370)
(185,426)
(92,672)
(98,082)
252
(1,314,298)
926,748
647,456
1,205,263
(755,096)
—
2,024,371
Segment profit/(loss) from
operations
Financial revenues
32.1.
1,581,994
Financial expenses
32.2.
(981,226)
Share in profit from
investments accounted
for under equity method
(750)
—
54
—
Profit before tax
Income tax expense
—
(696)
2,624,443
33
(454,453)
Net profit
2,169,990
.
Depreciation
and amortisation
Additions to non-current
assets
30.2.
1,039,774
358,948
741,109
120,291
2,260,122
7,8,9,10
799,534
498,707
476,890
258,683
2,033,814
159
Note
Refining
Segment
Retail
Segment
Petrochemical
Segment
Corporate
Functions
Adjustments
Total
29
58,475,608
34,037,500
14,313,184
146,782
—
106,973,074
Sales revenues from
transactions with other
segments
25,011,572
115,966
3,343,901
217,775
(28,689,214)
—
Sales revenues
83,487,180
34,153,466
17,657,085
364,557
(28,689,214)
106,973,074
Sales revenues from external
customers
Operating expenses
(81,137,448)
(33,645,953)
(16,398,891)
(1,033,296)
28,689,223
(103,526,365)
31.1.
331,169
116,333
202,450
356,881
(178)
1,006,655
31.2.
(575,007)
(198,112)
(1,447,156)
(166,795)
178
(2,386,892)
2,105,894
425,734
13,488
(478,653)
9
2,066,472
Segment profit/(loss) from
operations
Financial revenues
32.1.
2,780,145
Financial expenses
32.2.
(2,243,175)
Share in profit from
investments accounted
625
—
179
187,495
—
Profit before tax
188,299
2,791,741
Income tax expense
33
(776,738)
Net profit
2,015,003
.
Depreciation
and amortisation
Additions to non-current
assets
30.2.
1,113,911
333,801
821,409
110,827
2,379,948
7,8,9,10
899,882
425,064
641,796
166,712
2,133,454
Additions to non-current assets of operating segments and corporate functions include capital expenditures and borrowing costs.
6.2. Other segment data
6.2.1. Assets by operating segments
as at
31/12/2012
as at
31/12/2011
30,199,689
32,821,176
5,955,683
6,067,744
12,779,493
13,030,826
Segment assets
48,934,865
51,919,746
3,935,065
7,077,508
Refining Segment
Retail Segment
Corporate Functions
Adjustments
(239,150)
(265,776)
52,630,780
58,731,478
including:
Non-current assets classified
as held for sale
Note
Refining Segment
Segment assets
Corporate Functions
20,11
Investments in shares accounted
as at
31/12/2012
as at
31/12/2011
as at
31/12/2012
as at
31/12/2011
56,551
20,960
6,459
7,758
994
1,046
5,473
5,367
57,545
22,006
11,932
13,125
7,074
6,519
—
—
64,619
28,525
11,932
13,125
Operating segments include all assets except for financial assets (disclosed in notes 13,14,18,19) and tax assets in note 33.2. Assets used
jointly by different operating segments are allocated based on revenues generated by particular operating segments.
160
6.2.2. Recognition and reversal of impairment allowances
Recognition
Note
Refining Segment
Retail Segment
Impairment allowances by segment
Corporate Functions
Reversal
for the year
ended
31/12/2012
for the year
ended
31/12/2011
for the year
ended
31/12/2012
for the year
ended
31/12/2011
(1,114,370)
(624,596)
104,472
66,190
(52,767)
(119,597)
30,634
37,683
(168,749)
(1,447,992)
96,499
42,720
(1,335,886)
(2,192,185)
231,605
146,593
(47,478)
(79,773)
48,907
83,296
Impairment allowances
in operating activities
16,31.1,31.2.
(1,383,364)
(2,271,958)
280,512
229,889
in financing activities
32.1,32.2
(14,977)
(15,012)
8,296
8,861
(1,398,341)
(2,286,970)
288,808
238,750
including:
Impairment allowances of property, plant and equipment and intangible assets
Recognition
Refining Segment
Reversal
for the year
ended
31/12/2012
for the year
ended
31/12/2011
for the year
ended
31/12/2012
for the year
ended
31/12/2011
(757,319)
(360,072)
46,217
19,729
Retail Segment
(36,634)
(106,050)
23,744
31,271
(61,115)
(1,382,312)
21,278
8,919
(855,068)
(1,848,434)
91,239
59,919
(10,635)
(7,416)
8,193
737
(865,703)
(1,855,850)
99,432
60,656
Impairment allowances by segment
Corporate Functions
Impairment allowances by segment as disclosed in the consolidated statement of profit or loss and other comprehensive income include
allowances of receivables value, the value of inventories valued at net realizable value and impairment of non-current assets.
Recognition and reversal of allowances was performed in relation to inventory revaluation, occurrence or extinction of indicators in respect
of overdue receivables, uncollectible receivables or receivables in court as well as impairment of non-current assets and intangible assets
and financial assets available for sale.
In 2012 allowances recognised in the refining segment concerned primarily impairment of property, plant and equipment of Ceska
Rafinerska. Allowances recognised in the retail segment concerned mainly changes in operating effectiveness of individual petrol stations
including changes in the traffic system and construction of competing stations in the nearby surroundings. Corporate functions consist
mainly of allowances for idle assets and obsolete raw materials.
Additional information concerning impairment allowances of property, plant and equipment are disclosed in note 15.
6.2.3. Geographical information
Revenues from sale are disclosed in geographical information by customer’s premises countries
for the year ended
31/12/2012
for the year ended
31/12/2011
Poland
51,532,228
46,326,625
Germany
19,760,387
18,460,641
Czech Republic
12,914,485
11,576,378
Lithuania, Latvia, Estonia
10,634,855
8,832,521
Other countries
25,259,595
21,776,909
120,101,550
106,973,074
Note
Total
29
„Other countries” entry comprises of sales to customers from Switzerland, Denmark, Great Britain, Austria and Ukraine.
161
6.2.3. Geographical information continued
Geographical allocation of non-current assets
as at
31/12/2012
as at
31/12/2011
16,177,302
15,962,029
850,907
927,668
Czech Republic
4,139,027
5,382,672
Lithuania, Latvia, Estonia
5,198,755
5,806,542
40,090
36,093
7,8,9,10
26,406,081
28,115,004
Note
for the year ended
31/12/2012
for the year ended
31/12/2011
Light distillates
17,239,314
15,620,177
Medium distillates
33,780,664
31,598,963
9,602,317
8,354,655
Note
Poland
Germany
Other countries
6.3. Sales revenues
Refining Segment
Heavy fractions
Other
5,252,605
2,901,813
65,874,900
58,475,608
Light distillates
15,289,032
13,922,875
Medium distillates
19,687,965
17,079,608
3,164,306
3,035,017
38,141,303
34,037,500
Monomers
2,137,423
2,033,615
Polymers
4,328,113
3,991,723
Aromas
1,461,036
1,259,805
Fertilizers
1,356,233
1,241,073
Plastics
1,284,021
1,329,757
PTA
1,875,273
1,238,788
Other
3,527,069
3,218,423
15,969,168
14,313,184
116,179
146,782
120,101,550
106,973,074
Retail Segment
Other
Corporate Functions
29
6.4. Information about major customers
In 2012 and 2011 no leading customers were identified in the Capital Group, for which turnover would exceeded 10% of total revenues
from sale of the ORLEN Capital Group.
162
7. Property, plant and equipment
as at
31/12/2012
Land
as at
31/12/2011
909,017
938,968
10,262,900
10,867,658
11,714,361
12,701,312
Vehicles and other
833,624
902,736
1,023,832
1,167,977
Assets related to exploration and extraction of hydrocarbons/salt
183,539
88,537
Other
840,293
1,079,440
24,743,734
26,578,651
Construction in progress
Changes in property, plant and equipment by class
Land
Buildings
and
constructions
Machinery
and
Vehicles
equipment and other
Assets related
to exploration
and
extraction of
hydrocarbons/
salt
Other
Total
Gross book value
1 January 2012*
1,004,652
18,499,268
31,564,249
2,322,826
88,537
1,232,454
54,711,985
Investment expenditures
197
24,337
127,422
53,683
91,358
1,657,903
1,954,900
Other increases
282
1,605
3,176
3,368
18,467
1,800
28,698
Borrowing costs
—
6,890
13,091
523
—
751
21,255
Reclassifications
7,943
503,890
1,189,248
93,424
(14,615)
(1,846,751)
(66,861)
Sale
(347)
(4,562)
(4,437)
(49,192)
—
—
(58,538)
Liquidation
(785)
(55,770)
(341,480)
(158,261)
—
—
(556,296)
(196)
(3,289)
(9,470)
(7,442)
(208)
(26,866)
(47,470)
Foreign exchange differences
Other decreases
(40,443)
(308,033)
(1,337,454)
(61,012)
—
(44,660)
(1,791,602)
31 December 2012
971,303
18,664,336
31,204,345
2,197,917
183,539
974,631
54,196,071
Accumulated depreciation, impairment allowances and settled government grants
1 January 2012*
Depreciation
Other increases
Reclassifications
Sale
65,684
7,602,844
18,834,398
1,416,500
—
153,014
28,072,439
797
651,903
1,315,897
189,644
—
—
2,158,241
—
—
2,413
2,682
—
—
5,095
(586)
315,789
397,752
(947)
—
(14,803)
697,206
—
1,535
(13,154)
(14,175)
—
—
(25,794)
—
(1,347)
(4,033)
(45,591)
—
—
(50,971)
(406)
(45,349)
(302,398)
(140,472)
—
—
(488,625)
Other decreases
—
(1,833)
868
(6,949)
—
—
(7,914)
Government grants – settlement
—
2,418
(174)
480
—
—
2,724
Liquidation
(3,203)
(151,314)
(765,524)
(40,042)
—
(9,106)
(969,189)
31 December 2012
62,286
8,374,646
19,466,045
1,361,130
—
129,105
29,393,212
163
7. Property, plant and equipment continued
Assets related
to exploration
and
extraction of
hydrocarbons/
salt
Other
Total
Land
Buildings
and
constructions
927,646
15,494,920
26,548,558
2,034,897
42,122
5,735,178
50,783,320
Machinery
and
Vehicles
equipment and other
Gross book value
1 January 2011*
503
18,845
133,431
63,708
55,827
1,736,590
2,008,904
Other increases
—
16,071
14,992
6,419
35
34,554
72,071
Borrowing costs
—
111,590
125,307
9,322
—
(192,739)
53,480
Reclassifications
19,873
2,463,316
3,110,459
282,605
(9,447)
(6,098,184)
(231,378)
Sale
(5,137)
(7,417)
(5,075)
(52,144)
—
—
(69,773)
Liquidation
(829)
(73,574)
(317,018)
(110,767)
—
—
(502,188)
Other decreases
(184)
(8,201)
(30,199)
(6,936)
—
(42,808)
(88,328)
31 December 2011
62,780
483,718
1,983,794
95,722
—
59,863
2,685,877
1,004,652
18,499,268
31,564,249
2,322,826
88,537
1,232,454
54,711,985
Accumulated depreciation, impairment allowances and settled government grants
1 January 2011
Depreciation
Other increases
Reclassifications
Sale
31,818
6,253,833
15,675,293
1,279,285
—
80,032
23,320,260
865
643,191
1,429,470
205,153
—
—
2,278,679
—
8,647
3,195
2,761
—
—
14,603
31,315
578,769
972,620
25,073
—
67,839
1,675,616
—
(21,185)
(360)
(213)
—
—
(21,758)
(145)
(4,902)
(18,002)
(49,804)
—
—
(72,853)
Liquidation
—
(55,920)
(287,343)
(103,532)
—
—
(446,795)
Other decreases
—
(3,157)
(12,389)
(6,565)
—
—
(22,111)
Government grants – settlement
—
2,544
2,496
61
—
—
5,101
1,831
201,024
1,069,418
64,281
—
5,143
1,341,697
65,684
7,602,844
18,834,398
1,416,500
—
153,014
28,072,439
1 January 2012
—
28,766
28,539
3,590
—
—
60,895
31 December 2012
—
26,790
23,939
3,163
—
5,233
59,125
1 January 2011
—
29,777
29,929
341
—
—
60,047
31 December 2011
—
28,766
28,539
3,590
—
—
60,895
1 January 2012*
938,968
10,867,658
12,701,312
902,736
88,537
1,079,440
26,578,651
31 December 2012
909,017
10,262,900
11,714,361
833,624
183,539
840,293
24,743,734
1 January 2011*
895,828
9,211,310
10,843,336
755,271
42,122
5,655,146
27,403,013
31 December 2011
938,968
10,867,658
12,701,312
902,736
88,537
1,079,440
26,578,651
31 December 2011
Government grants
Net book value
* Restatement of comparable data: decrease in gross book value and accumulated depreciation, impairment allowances and settled government
grants without an effect on net book value as at 31 January 2011 and as at 31 December 2011.
164
Changes in impairment allowances of property, plant and equipment
Note
1 January 2012*
Buildings Machinery
and Total
and
Land constructions equipment
Vehicles
and Construction
other
in progress
Total
57,273
1,249,581
3,631,247
75,157
153,012
5,166,270
Recognition
31.2.
44
346,135
415,702
10,759
16,437
789,077
Reversal
31.1.
(630)
(29,716)
(4,727)
(7,265)
(16,484)
(58,822)
Usage
—
(729)
(12,455)
(3,071)
(3,183)
(19,437)
Reclassifications
—
99
(768)
(1,370)
(11,573)
(13,612)
(2,585)
(163,306)
(453,877)
(6,760)
(9,106)
(635,635)
54,102
1,402,064
3,575,122
67,450
129,103
5,227,841
(586)
315,789
397,752
(947)
(14,803)
697,206
24,963
630,970
2,351,408
45,408
80,029
3,132,778
increase/(decrease) net*
1 January 2011
Recognition
31.2.
37,083
609,863
981,367
26,559
74,996
1,729,868
Reversal
31.1.
(5,765)
(27,830)
(6,145)
(772)
(7,157)
(47,669)
Usage
—
(235)
(3,189)
(68)
—
(3,492)
Reclassifications
(3)
(3,029)
587
(646)
—
(3,091)
995
39,842
307,219
4,676
5,144
357,876
57,273
1,249,581
3,631,247
75,157
153,012
5,166,270
31,315
578,769
972,620
25,073
67,839
1,675,616
increase net*
* Increase/(decrease) net includes recognition, reversal, usage and reclassifications. Foreig exchange differences are recognised in Foreign exchange
differences on subsidiaries from consolidation.
Recognition and reversal of allowances for property, plant and equipment are recognised in other operating activities.
Impairment allowances of property, plant and equipment as at 31 December 2012 and 31 December 2011 for idle assets amounted to PLN
46,325 thousand and PLN 47,106 thousand, respectively.
Other information regarding property, plant and equipment
Note
The gross book value of all fully depreciated property, plant
and equipment still in use
as at
31/12/2012
as at
31/12/2011
3,780,966
4,064,004
The net book value of temporarily idle property, plant and equipment
10,659
31,364
The net book value of idle property, plant and equipment and not classified
as held for sale
53,604
53,435
153,944
169,327
The net book value of leased non-current assets
36.1.
The Capital Group conducts periodic review of depreciation rates of property, plant and equipment and the adjustment of depreciation
expense is made prospectively.
Should the rates from 2011 be applied, depreciation expense for 2012 would be higher by PLN 69,265 thousand.
Additional information regarding property, plant and equipment, which were pledged for the Capital Group’s liabilities is presented in note 28.
The Group received grants for the financing of investment projects related to production technology change of chlorine, purchase of fluid
furnaces, and creating new cubature facilities within Płocki Park Przemysłowo – Technologiczny, which come mainly from European Regional
Development Fund (ERDF) and from National Fund for Environmental Protection and Water Management.
Additionally the Group used the funds from Corporate Fund for Rehabilitation of Disabled Persons, which were used for the purchase
of car sets for fuel transportation.
165
8. Investment property
At the beginning of the period
Reclassification from property, plant and equipment
Sale
Fair value adjustment
increase
for the year ended
31/12/2012
for the year ended
31/12/2011
117,645
71,976
1,254
32,220
(79)
(319)
3,370
10,390
3,370
10,390
(4,920)
3,378
117,270
117,645
Investment property includes mainly social charges and Office space, as well as land. Depending on the characteristics of the investment
property, its fair value was estimated based on comparison or revenue approach. Comparison approach was applied assuming, that the value
of assessed property was equal to the market price of a similar property. In revenue approach the calculation was based on discounted
cash flow method, due to variability of revenues in foreseeable future. 10-year period forecasts were applied in the analysis. The discount
rate used reflects the relation, as expected by the buyer, between yearly revenue from an investment property and expenditures required
to purchase investment property.
Forecasts of discounted cash flows relating to the valued assets consider provisions included in all rent agreements as well as external data,
e.g. current market rent charges for similar assets, in the like location, technical conditions, standard and designed for similar purposes.
Revenues and expenses associated with investment property
as at
31/12/2012
as at
31/12/2011
Rental income from investment property
13,400
18,046
Direct operating expenses
(4,804)
(7,159)
Generating rental income in the given period
(3,773)
(6,615)
Not generatating rental income in the given period
(1,031)
(544)
Additional information regarding valuation and discounting of investment property is presented in note 3.3.7 and 4.2.
9. Intangible assets
as at
31/12/2012
as at
31/12/2011
Internally generated intangible assets
78,092
70,608
Intangible assets under development related to exploration and extraction
of hydrocarbons
57,582
50,491
Note
Other
Other intangible assets
Software
Patents, trade marks and licenses
Goodwill
Rights
Other
166
9.3.
20,510
20,117
1,369,208
1,252,436
48,227
60,808
490,980
544,854
89,094
98,832
686,953
507,785
53,954
40,157
1,447,300
1,323,044
9.1. The changes in internally generated intangible assets
Intangible assets under
development related to
exploration and extraction of
hydrocarbons
Development
expenditures
Total
50,491
88,290
138,781
7,091
4
7,095
—
2,535
2,535
Gross book value
1 January 2012
Other increases
Reclassifications
—
1,628
1,628
Liquidation
—
(6,001)
(6,001)
—
(3,826)
(3,826)
57,582
82,630
140,212
31 December 2012
Accumulated amortisation, impairment allowances and settled government grants
1 January 2012
—
68,173
68,173
Amortisation
—
6,496
6,496
Other increases
—
2,531
2,531
—
(461)
(461)
Liquidation
—
(13,230)
(13,230)
—
(1,714)
(1,714)
31 December 2012
—
61,795
61,795
1 January 2011
26,364
83,388
109,752
24,127
390
24,517
—
3,837
3,837
Gross book value
Other increases
Reclassifications
—
1,890
1,890
Liquidation
—
(267)
(267)
Other decreases
—
(7,094)
(7,094)
—
6,146
6,146
50,491
88,290
138,781
31 December 2011
1 January 2011
—,
51,767
51,767
Amortisation
—,
10,189
10,189
—,
2,328
2,328
Liquidation
—
(207)
(207)
Other decreases
—,
(2)
(2)
—
4,098
4,098
31 December 2011
—
68,173
68,173
Government grants
1 January 2012
—
—
—
31 December 2012
—
325
325
1 January 2011
—
—
—
31 December 2011
—
—
—
1 January 2012
50,491
20,117
70,608
31 December 2012
57,582
20,510
78,092
1 January 2011
26,364
31,621
57,985
31 December 2011
50,491
20,117
70,608
Net book value
167
Changes in impairment allowances of internally generated intangible assets
Note
Other
1 January 2012
3,049
Usage
31.2.
253
Reversal
(660)
Reclassifications
523
Other decreases
(577)
Foreign exchange
432
3,020
increase / decrease net*
(461)
1 January 2011
729
Recognition
31.2.
2,388
Reversal
31.1.
(60)
Foreign exchange
(8)
3,049
2,328
9.2. The changes in other intangible assets
Software
Patents, trade
marks and
licenses
Goodwill
Rights
Other
Total
274,789
1,184,614
433,632
597,349
59,754
2,550,138
Gross book value
1 January 2012
4,468
3,370
—
—
36,319
44,157
Other increases
5,946
1,685
—
845,102
617
853,350
Reclassifications
1,448
25,181
—
17
423
27,069
(4)
(1)
—
(29,776)
—
(29,781)
Liquidation
Sale
(2,694)
(3,599)
—
(14,580)
(79)
(20,952)
Other decreases
(1,169)
(2,637)
—
(585,784)
(16,748)
(606,338)
(13,620)
(14,987)
(3,103)
(25,258)
(2,980)
(59,948)
31 December 2012
269,164
1,193,626
430,529
787,070
77,306
2,757,695
1 January 2012
213,957
639,687
334,800
89,564
19,597
1,297,605
16,745
73,407
—
—
3,593
93,745
Other increases
1,161
169
—
—
—
1,330
2,210
2,869
8,045
31,942
28
45,094
Amortisation
Sale
Liquidation
Other decreases
Government grants –
settlement
168
(4)
(1)
—
—
—
(5)
(2,637)
(3,575)
—
(14,580)
(477)
(21,269)
—
(2,614)
—
—
(26)
(2,640)
6
32
—
—
—
38
(10,519)
(7,369)
(1,410)
(6,809)
637
(25,470)
31 December 2012
220,919
702,605
341,435
100,117
23,352
1,388,428
9.2. The changes in other intangible assets continued
Software
Patents, trade
marks and
licenses
Goodwill
Rights
Other
Total
241,346
1,014,543
419,390
403,028
41,042
2,119,349
4,555
4,013
6,608
—
19,480
34,656
Gross book value
1 January 2011
Other increases
5,174
16,125
3,922
1,063,821
5,543
1,094,585
Reclassifications
3,980
139,296
—
34,589
7,152
185,017
(1)
—
—
(242,595)
—
(242,596)
(2,234)
(16,497)
—
(17,122)
—
(35,853)
(21)
(646)
—
(669,022)
(16,751)
(686,440)
21,990
27,780
3,712
24,650
3,288
81,420
274,789
1,184,614
433,632
597,349
59,754
2,550,138
18,721
15,207
1,074,499
Sale
Liquidation
Other decreases
31 December 2011
1 January 2011
Amortisation
Other increases
Sale
Liquidation
Other decreases
Government grants –
settlement
177,306
532,122
331,143
17,557
70,138
—
—
1,859
89,554
217
8,771
1,844
14,580
4,310
29,722
4,708
25,383
(159)
71,854
2,778
104,564
(1)
—
—
—
—
(1)
(2,174)
(7,206)
—
(15,045)
(4,291)
(28,716)
(2)
(342)
—
—
(659)
(1,003)
3
32
—
—
—
35
16,343
10,789
1,972
(546)
393
28,951
213,957
639,687
334,800
89,564
19,597
1,297,605
1 January 2012
24
73
—
—
—
97
31 December 2012
18
41
—
—
—
59
1 January 2011
21
105
—
—
—
126
31 December 2011
24
73
—
—
—
97
1 January 2012
60,808
544,854
98,832
507,785
40,157
1,252,436
31 December 2012
48,227
490,980
89,094
686,953
53,954
1,369,208
31 December 2011
Government grants
Net book value
1 January 2011
64,019
482,316
88,247
384,307
25,835
1,044,724
31 December 2011
60,808
544,854
98,832
507,785
40,157
1,252,436
169
Changes in impairment allowances of other intangible assets
Note
1 January 2012
Recognition
31.2.
Reversal
31.1.
Usage
Reclassifications
Patents, trade
marks and
Software
licenses
Rights
Other
Total
12,143
40,756
309,650
74,492
7,455
444,496
3,461
2,649
8,045
58,387
1,360
73,902
(216)
(579)
—
(26,445)
—
(27,240)
(1,208)
740
—
—
—
(468)
173
59
—
—
(754)
(522)
—
—
—
—
(578)
(578)
(556)
(1,607)
3
(6,316)
453
(8,023)
13,797
42,018
317,698
100,118
7,936
481,567
Other decreases
Foreign exchange
Goodwill
increase differences net*
2,210
2,869
8,045
31,942
28
45,094
1 January 2011
7,044
16,881
309,773
3,184
4,747
341,629
4,731
34,526
(159)
75,038
2,778
116,914
Recognition
31.2.
Reversal
31.1.
Foreign exchange
(23)
(9,143)
—
(3,184)
—
(12,350)
391
(1,508)
36
(546)
(70)
(1,697)
12,143
40,756
309,650
74,492
7,455
444,496
4,708
25,383
(159)
71,854
2,778
104,564
Recognition and reversal of allowances for intangible assets are recognised in other operating activities.
Other information regarding intangible assets
The gross book value of all fully depreciated intangible assets still in use
The net book value of intangible assets with indefinite useful life
The net book value of intangible assets retired from active use
and not classified as held for sale
as at
31/12/2012
as at
31/12/2011
508,919
510,749
10,771
11,498
3,740
3,453
The Capital Group reviews economic useful lives of intangible assets and adjustment of amortisation expense is made prospectively.
Should the rates from 2011 be applied, depreciation expense for 2012 would be higher by PLN 1,706 thousand.
The net book value of intangible assets with indefinite useful life includes expenses related to registration of produced or imported
chemicals (described in Regulation No 1907/2006 of the European Parliament and of the Council concerning the Registration, Evaluation,
Authorisation and Restriction of Chemicals) – so called REACH. Due to the fact, that the registration is indefinite and the period of production or import of particular chemicals is unknown, indefinite useful life was assumed.
The Capital Group classifies goodwill as intangible assets with indefinite useful life.
170
9.3. Rights
9.3.1.CO2 emission rights
CO2 emission rights allocated to individual installations were granted on the basis of the Council of Ministers Regulation under the National
Allocation Plan II resulting from the Kyoto Protocol dated 11 December 1997 to the United Nations Framework Convention on Climate
Change, adopted by the European Union.
Change in owned CO2 emission rights (EUA, ERU and CER) emission rights in 2012
Quantity
(in tonnes)
Value
9,701,118
489,721
14,806,269
533,027
(11,282,331)
(537,861)
6,438,191
169,689
—
(16,748)
—
(18,449)
Granted free of charge
Settled for 2011
Purchase/(Sale), net
CO2 emission in 2012
19,663,247
619,379
10,724,022
378,009
In years 2010-2011 the Group concluded hedge transactions securing the CO2 emission rights purchase price in the future. In 2012 CO2
emission rights were repurchased and forward contracts were settled.
As at 31 December 2012 the market value of one EUA allowance (European Union Emission Allowance) amounted to PLN 26.28 (which
is EUR 6.43) (source: www.theice.com).
As at 31 December 2012 the Group possessed ERU rights in the amount of 609,769 tonnes, which were received free of charge as a result
of investment in Nitric Acid Plant reducing the emission of nitrous suboxide realised in 2008.
As at 31 December 2012 the market value of one ERU allowance amounted to PLN 0.49 (which is EUR 0.12) translated by the exchange
rate of 31 December 2012.
9.3.2. Energy rights
Change in energy rights in 2012
Yellow
Red
Violet
Green
—
—
18,064
Quantity (in MWh)
Granted free of charge
Settled for 2011
Purchase/(Sale)
Reclassifications/Conversion
Total
Value
—
2,257,879
741,474
1,630,445
—
—
102,314
(3,921)
(114,546)
(621)
(4,552)
(2,748)
5,000
8,441
3,500
54,771
14,019
(360,000)
(470,763)
—
—
(48,881)
—
—
—
—
(15,194)
382,553
3,311,456
2,879
50,219
67,574
Additional information is presented in note 3.3.8.2.
171
10. Perpetual usufruct of land
Note
Reclassifications
Amortisation
for the year ended
31/12/2012
for the year ended
31/12/2011
95,664
96,354
2,822
1,420
979
200
(1,640)
(1,526)
—
(384)
recognition
31.2.
(215)
(472)
reversal
31.1.
215
87
Sale and liquidation
(31)
(430)
(17)
30
97,777
95,664
The Group possesses perpetual usufruct of land received free of charge under administrative decisions as according to binding regulations.
According to the amended Act of 29 July 2005 on the transformation of perpetual usufruct into real estate ownership (consolidated
text Journal of Laws of 2012, pos. 83) any natural or legal person (with certain exceptions) may request conversion of perpetual usufruct
into real estate ownership right, as long as on 13 October 2005 was the user of perpetual usufruct or is the legal successor of such user.
The amendment of the Act has been effective since 9 October 2011. The amendment of the Act should be considered by the lessee
as a change to the contract that requires re-evaluation of the classification of the lease, due to the introduction of the option allowing
the transformation of perpetual usufruct right of ownership by legal classification of the persons. The Group carried out the appropriate
analysis. Re-evaluation of the lease classification confirms the current perpetual usufruct agreements as operating leases.
As at 31 December 2012 and 31 December 2011 the Capital Group recognised perpetual usufruct of land received under an administrative decision as off-balance sheet items of PLN 1,010,583 thousand and PLN 1,017,741 thousand, respectively. These rights were valued
based on the fair value.
For 2012 and 2011 the cost connected with perpetual usufruct were PLN (48,628) thousand and PLN (47,435) thousand, respectively.
The land, in the most cases is located nearby buildings associated with the Group’s core business. In particular, on this land are production
facilities, fuel terminals, petrol stations and other facilities supporting Group operations.
11. Investments in shares accounted for under equity method
Carrying amount as at
172
Group’s share in capital/
voting rights as at
31.12.2012
31.12.2011
31.12.2012
31.12.2011
Principal activity
Naftelf
5,770
6,002
34.00%
34.00%
distribution of aviation fuels and
construction of storage warehouses
Wircom
5,030
4,987
49.02%
49.02%
power equipment repair services for
chemical, food, energy industry
Other
1,132
2,136
11,932
13,125
12. Jointly controlled entities consolidated using the proportionate method
PKN ORLEN holds 50% share in a joint-venture entity Basell Orlen Polyolefins Sp. z o.o. (BOP), involved in production, distribution and
sale of polymers, and in Płocki Park Przemysłowo-Technologiczny S.A. (PPPT), involved in advisory, business management services, holding
management services and planning, purchasing and sales of real estates on its own account.
As at 31 December 2012 and for the year ended 31 December 2012 and as at 31 December 2011 and for the year ended 31 December
2011, the Group’s share in assets, liabilities, revenues and expenses of jointly controlled entities is as follows:
Basell Orlen Polyolefins Sp. z o.o. (BOP)
as at
31/12/2012
as at
31/12/2011
Non-current assets
567,888
597,518
Current assets
730,302
696,774
Total assets
1,298,190
1,294,292
162,206
238,700
567,320
515,398
Total liabilities
729,526
754,098
for the year ended
31/12/2012
for the year ended
31/12/2011
Revenues
1,729,594
1,747,653
(1,638,323)
(1,596,446)
91,271
151,207
(54,122)
(65,432)
(11,997)
(12,956)
(782)
926
24,370
73,745
Financial revenues and expenses, net
13,522
(47,056)
Profit before tax
37,892
26,689
Income tax expense
(7,591)
(5,023)
Net profit
30,301
21,666
Net cash provided by operating activities
120,753
154,815
Net cash (used in) investing activities
(18,387)
(27,130)
Net cash (used in) financing activities
(70,970)
(88,839)
as at
31/12/2012
as at
31/12/2011
Cost of finished goods, merchandise and raw materials sold
Other operating revenues and expenses, net
Płocki Park Przemysłowo-Technologiczny S.A. (PPPT)
Non-current assets
12,666
9,584
Current assets
21,791
24,527
Total assets
34,457
34,111
—
—
1,488
1,300
Total libilities
1,488
1,300
173
Płocki Park Przemysłowo-Technologiczny S.A. (PPPT) continued
for the year ended
31/12/2012
Revenues
Cost of finished goods, merchandise and raw materials sold
Other operating revenues and expenses, net
for the year ended
31/12/2011
3,124
2,921
(2,243)
(1,480)
881
1,441
(2,214)
(2,686)
355
470
(Loss) from operations
(978)
(775)
Financial revenues and expenses, net
1,225
1,084
Profit before tax
247
309
Income tax expense
(67)
(58)
Net profit
180
251
Net cash provided by/(used in) operating activities
(454)
26
(3,032)
1,228
as at
31/12/2012
as at
31/12/2011
Quoted shares
996
690
Wodkan S.A.
982
674
14
16
Unquoted shares
39,824
39,830
Naftoport Sp. z o.o.
39,502
39,502
322
328
40,820
40,520
13. Financial assets available for sale
Ideon S.A. (previously Centrozap Katowice S.A.)
Other
As at 31 December 2012 and 31 December 2010 impairment allowances of financial assets available for sale amounted to PLN 74,101
thousand and PLN 74,469 thousand, respectively.
14. Other long-term assets
Cash flow hedge instruments
foreign currency forwards (operating exposure)
commodity swaps
currency interest rates swaps
Loans granted
as at
31/12/2012
as at
31/12/2011
28,071
81
—
81
26,042
—
2,029
—
8,933
13,115
Other
11,440
5,141
Financial assets
48,444
18,337
Advances for construction in progress
5,386
2,520
Other
1,035
10,109
Non-financial assets
6,421
12,629
54,865
30,966
As at 31 December 2012 and as at 31 December 2011 impairment allowances of other long-term assets amounted to PLN 6,995 thousand
and PLN 403 thousand, respectively.
174
15. Impairment of non-current assets
Indicator for performing impairment tests of non-current assets in 2012 was worsening macroeconomic situation, the decline in economic
growth, weaker prospects for growth inducted by another wave of global crisis, the reduction of fuel consumption growth, sustaining
high crude oil prices and consequently products (including fuels) and growing pressure on refining and petrochemical margins.
As at 31 December 2012 an impairment test was carried out for all identified cash generating units.
During development of assumptions to impairment tests the possibility of estimation of the fair value and value in use of individual assets
of PKN ORLEN S.A. was considered. Lack of number of market transactions for similar assets to those held by the Group which would
allow to reliably estimate their fair value makes, makes this method of valuation not possible to implement. The current market capitalization does not reflect the fair value as a value dependent on fluctuations in the stock market, which in the case of the global crisis
is characterized by high volatility. As a result, it was concluded that the best estimate of the actual values of individual assets of the Group
will be its value in use.
The analyses were performed based on financial projections for years 2013-2017 adjusted by level and effects of capital expenditures.
After 5-year projection period a fixed cash flow growth rate for the individual geographical markets at the level of long-term inflation
was used.
Future financial performance is based on number of assumptions that are in respect of macroeconomic factors, such as foreign exchange
rates, raw materials prices, interest rates, partially out of the Capital Group’s control. The change of these assumptions might influence
the results of the impairment tests of non-current assets and consequently might lead to changes in Group’s financial position and performance.
In the calculation of value in use, estimated future cash flows are discounted to its present value using pre-tax discount rate that reflects
current market assessment of the time value of money and the specific risk for the asset. The discount rate is calculated as the weighted
average cost of capital. The sources of macroeconomic indicators necessary to determine the discount rate were the publications of prof.
Aswath Damodoran (source: http://pages.stern.nyu.edu) of officialy listed government bonds and agencies rating available at 31 December
2012.
The discount rate structure used in the impairment testing of assets by individual operating segments
of ORLEN Capital Group as at 31 December 2012
CZECH REPUBLIC
GERMANY
Rafinery Petrochemistry
Retail
10.92%
10.99%
9.53%
7.04%
13.11%
Cost of debt
after tax
3.37%
3.37%
3.37%
2.39%
Cost of capital
Retail
POLAND
Rafinery Petrochemistry
LITHUANIA
Retail
Rafinery
Retail
13.19%
11.68%
12.39%
10.84%
5.35%
5.35%
5.35%
5.51%
5.51%
0.62
0.30
1.22
0.62
1.22
Capital structure
0.62
0.30
1.22
1.22
Nominal
discount rate
8.03%
9.22%
6.15%
4.49%
10.14%
11.36%
8.20%
9.76%
7.91%
Long-term rate
of infation
2.50%
2.50%
2.50%
1.88%
3.02%
3.02%
3.02%
2.32%
2.32%
Cost of equity is determined by the profitability of the government bonds that are considered to be risk-free, with the level of market
and operating segment risk premium (beta).
Cost of capital includes the average level of credit margins and expected market value of money for each country.
For the purpose of impairment testing of property, plant and equipment and intangible assets periods of analysis were separately determined for each cash-generating unit on the basis of the expected useful life.
Useful life taken for analysis by operating segments as at 31 December 2012
Useful life in years
Minimum
Median
Maximum
Refining Segment
11
17
25
13
18
25
Retail Segment
13
15
21
175
Impact of impairment allowances of non-current assets on consolidated statement of profit or loss
and other comprehensive income for the period ended 31 December 2012
Note
Recognition
Reversal
Total
(44)
630
586
(346,135)
29,716
(316,419)
Land
(415,702)
4,727
(410,975)
Vehicles and other
(10,759)
7,265
(3,494)
(16,437)
16,484
47
(3,461)
216
(3,245)
Patents, trade marks and licenses
(2,649)
579
(2,070)
Goodwill
(8,045)
—
(8,045)
(58,387)
26,445
(31,942)
Assets held for sale
(2,256)
13,155
10,899
Other
(1,828)
215
(1,613)
(865,703)
99,432
(766,271)
Software
Rights
31.1., 31.2.
In 2012 net impairment of PLN (766,271) thousand concerned mainly the company Ceska Rafinerska a.s. in the refining segment
of the Unipetrol Group.
Impairment of assets in refinery segment Unipetrol is in particular the result of:
• decrease of EBITDA (lower consumption growth, pressure on trading margins);
• deterioration of oil supply economics (prices, logistics);
• optimization (reduction) of capital expenditure.
In 2011, net impairment allowance in the amount of PLN (1,795,194) thousand concerned mainly petrochemical, refining and retail segments:
• net impairment allowance in refining segment:
– Unipetrol Group: Paramo a.s. of PLN (209,358) thousand
– ORLEN Lietuva Group: AB ORLEN Lietuva of PLN (104,821) thousand.
• net impairment allowance in retail segment:
– PKN ORLEN S.A. of PLN (70,696) thousand
– ORLEN Lietuva Group: AB Ventus Nafta of PLN (13,401) thousand.
• net impairment allowance in petrochemical segment:
– Unipetrol Group: RPA s.r.o. of PLN (601,435) thousand
– ANWIL Group: ANWIL S.A. of PLN (455,712) thousand, Spolana a.s. of PLN (276,971) thousand.
As at 31 December 2012 impairment analysis was performed for intangible assets of indefinite useful life and goodwill. As a result an
impairment of goodwill was recognised in the Unipetrol Group of PLN 8,045 thousand.
As at 31 December 2011 there was no necessity for goodwill allowance.
Information about recognitions and reversals of allowances by category of non-current non-financial assets was disclosed in note 7, 9,
10 and 20.
Impairment allowances of assets were introduced at the level of individual CGUS, with division into representative assets groups and
impacted the financial results of operating activity of these entities.
Sensitivity analysis of the value in use
The crucial elements influencing the value in use of assets within individual units responsible for generating cash flows are: operating
profit plus depreciation and amortization (known as EBITDA) and the discount rate.
The effects of impairment sensitivity in relation to changes in these factors are presented below.
DISCOUNT
RATE
in PLN million
EBITDA
change
-5%
0%
5%
– 0.5 p.p.
decrease of impairment
6
470
935
0.0 p.p.
increase of impairment
387
—
553
+ 0.5 p.p.
828*
226
198
* Implementation of the above assumptions would result in an additional impairment allowance in the petrochemical segment of Unipetrol Group
and in the refining segment of ORLEN Lietuva Group.
176
16. Inventories
as at
31/12/2012
as at
31/12/2011
Raw materials
6,756,227
8,333,449
Work in progress
1,356,462
1,439,798
Finished goods
5,352,797
4,673,760
Merchandise
1,015,941
1,296,945
529,620
552,565
15,011,047
16,296,517
195,324
238,726
15,206,371
16,535,243
for the year ended
31/12/2012
for the year ended
31/12/2011
238,726
137,179
Recognition
425,020
300,879
Reversal
(119,795)
(39,416)
Usage
(340,808)
(179,613)
(7,819)
19,697
195,324
238,726
Spare parts
Inventory, net
Impairment allowances of inventories to net realisable value
Inventory, gross
Change in impairment allowances of inventories to net realizable value
Recognition and reversal of impairment allowances of inventories are recognised in cost of sales.
Additional information regarding inventories, which were used as pledge for the Capital Group’s liabilities was presented in note 28.
On 31 January 2012 the agreement with Maury Sp. z o.o. (that has been concluded on 23 December 2010) regarding gathering and
keeping crude oil reserves on the account of PKN ORLEN, upon which a part of reserves of crude oil amounting to PLN 909,592 thousand
translated at the rate from the day before the transaction (representing USD 299,968 thousand) has been sold, expired.
Therefore, and in accordance with applicable regulations regarding the maintenance of mandatory reserves in Poland, PKN ORLEN
acquired crude oil owned by Maury Sp. z o.o. The acquisition price of crude oil has been hedged with a forward contact. The settlement
of the hedging transaction decreased the value of the acquired raw material by PLN 202,707 thousand translated at the rate from the day
before the transaction (representing USD 63,283 thousand). As a result PKN ORLEN recognised in the first quarter the purchase of crude oil
of PLN 1,010,450 thousand translated at the rate from the day before the transaction (representing USD 310,767 thousand). The transfer
of ownership of the raw material to PKN ORLEN has been made on 31 January 2012, after settlement of full amount of the transaction.
On 28 March 2012 within the process of changing the formula of mandatory reserves of crude oil maintenance by PKN ORLEN, the Company
has signed the contract for sale of part of mandatory reserves and the contract for gathering and keeping of crude oil reserves with Ashby
Sp. z o.o., with its registered office in Warsaw.
Based on the sale agreement PKN ORLEN has sold crude oil to Ashby Sp. z o.o. The value of crude oil sold was PLN 1,252,300 thousand
translated with exchange rate as at 28 March 2012 (representing USD 402,669 thousand). The price of raw material was determined
based on market quotations.
Based on the agreement regarding gathering and keeping of crude oil reserves Ashby Sp. z o.o. will render service of maintaining mandatory
reserves of crude oil on behalf of PKN ORLEN, while PKN ORLEN will guarantee storing of inventories at the current location. The agreement regarding gathering and keeping of crude oil reserves has been concluded for a period of 1 year, whereby the Company takes into
account the possibility of its renewal for another period.
On 28 December 2012 within the process of changing the formula of maintenance of mandatory reserves of crude oil by PKN ORLEN,
the Company has signed the contract for sale of part of mandatory reserves and the contract for gathering and keeping of crude oil
reserves with Whirlwind Sp. z o.o., with its registered office in Warsaw.
Based on the sale agreement PKN ORLEN has sold crude oil to Whirlwind. The value of crude oil sold was PLN 1,181,698 thousand translated with exchange rate as at 28 December 2012 (representing USD 383,469 thousand).
The price of raw material was determined based on market quotations.
Based on the agreement regarding gathering and keeping of crude oil reserves Whirlwind will render service of maintaining mandatory
reserves of crude oil on behalf of PKN ORLEN, while PKN ORLEN will guarantee storing of inventories at the current location. The agreement regarding gathering and keeping of crude oil reserves has been concluded for a period of 13 months, however PKN ORLEN shall
have an option to repurchase the crude oil stocks at any time. At the conclusion of the arrangement, Whirlwind shall have an option to sell
the stocks to PKN ORLEN. Parties may also agree the possibility of extending the agreement for another period.
Additionally, PKN ORLEN signed with Whrilwind an agreement with market interest rate for granting short-term loan amounting
to PLN 271,791 thousand. As at the day of publication of the financial statements the loan was repaid.
177
17. Trade and other receivables
as at
31/12/2012
as at
31/12/2011
6,897,977
7,055,689
Receivables in court proceedings
74,504
82,384
Other
56,516
28,572
7,028,997
7,166,645
Excise tax and fuel charge receivables
159,175
170,997
Other taxation, duty and social security receivables
536,360
448,184
Advances for construction in progress
118,013
14,695
14,841
10,929
217,739
246,966
177
12,595
Non-financial assets
1,046,305
904,366
Receivables, net
8,075,302
8,071,011
514,569
542,971
8,589,871
8,613,982
Trade receivables
Financial assets
Prepayments for deliveries
Prepayments
Other
Receivables impairment allowance
Receivables, gross
As at 31 December 2012 and as at 31 December 2011 trade and other receivables denominated in foreign currencies amounted
to PLN 4,053,952 thousand and PLN 3,798,910 thousand, respectively. Detailed information about receivables from related parties
is disclosed in note 40.4.
The division of financial assets denominated in foreign currencies is presented in note 35.7.3.1.
Change in impairment allowances of trade and other receivables
Note
for the year ended
31/12/2012
for the year ended
31/12/2011
542,971
576,800
Recognition
31.2., 32.2.
107,434
127,934
Reversal
31.1., 32.1.
(69,103)
(138,358)
(59,296)
(43,546)
(7,437)
20,141
514,569
542,971
Usage
Recognition and reversal of impairment allowances of receivables are presented in other operating activities as far as principle receivables
are concerned and in financial activities as far as interests for delay in payment are concerned.
Additional information concerning receivables covered by cession are presented in note 28.
178
18. Other short-term financial assets
foreign currency forwards
commodity swaps
Derivatives not designated as hedge accounting
foreign currency swaps
commodity swaps
Embedded derivatives
foreign currency swaps
Bonds
Loans granted
Available for sale
as at
31/12/2012
as at
31/12/2011
46,491
225,910
44,978
25,898
1,513
200,012
22,783
48,003
9,425
30,395
428
3,410
12,930
14,198
744
180
744
180
22,262
15,197
275,763
4,041
82
103
368,125
293,434
Additional information regarding blocked deposits on bank accounts due to guarantees granted for proper contract execution is presented
in note 28.
19. Cash and cash equivalents
Cash on hand and in bank
Other cash (incl. cash in transit)
Other monetary assets
incl. restricted cash
as at
31/12/2012
as at
31/12/2011
2,180,032
4,361,978
31,393
94,351
—
952,837
2,211,425
5,409,166
64,038
108,517
Restricted cash refers mainly to blocked funds on bank accounts due to guarantees granted.
Other monetary assets as at 31 December 2011, with a maturity date of less than three months from the acquisition date include mainly
government bonds of PLN 952,819 thousand, which in the first quarter of 2012 were realized.
Components of cash and cash equivalents in the consolidated statement of cash flows and consolidated statement of financial position
are the same.
20. Non-current assets classified as held for sale
Shares
as at
31/12/2012
as at
31/12/2011
1,078
1,430
Energy rights
45,115
—
Items of non-current assets
18,426
27,095
64,619
28,525
In 2012, the Group classified as non-current assets held for sale yellow energy rights received free of charge, which were not used for
own usage.
As at 31 December 2012 and 31 December 2011 non-current assets items consisted mainly of buildings and constructions, land, plant
and machinery and vehicles.
179
Change in impairment allowances of non-current assets classified as held for sale
Note
for the year ended
31/12/2012
for the year ended
31/12/2011
9,261
9,753
Recognition
31.2.
2,256
6,208
Reversal
31.1.
(13,155)
(490)
Usage
(106)
(6,792)
Reclassification
13,612
—
(1,491)
582
10,377
9,261
21. Shareholders’ equity
21.1.Share capital
In accordance with the Polish Commercial Register, the share capital of Polski Koncern Naftowy ORLEN S.A. as at 31 December 2012
and as at 31 December 2011 amounted to PLN 534,636 thousand and is divided into 427,709,061 ordinary shares with nominal value
of PLN 1.25 each.
The share capital consisted of the following series of shares
Number of shares issued
Number of shares authorized
as at
31/12/2012
as at
31/12/2011
as at
31/12/2012
as at
31/12/2011
A Series
336,000,000
336,000,000
336,000,000
336,000,000
B Series
6,971,496
6,971,496
6,971,496
6,971,496
C Series
77,205,641
77,205,641
77,205,641
77,205,641
D Series
7,531,924
7,531,924
7,531,924
7,531,924
427,709,061
427,709,061
427,709,061
427,709,061
In Poland, each new issue of shares is labeled as a new series of shares. All of the above series have the exact same rights.
Share capital
Share capital revaluation adjustment
as at
31/12/2012
as at
31/12/2011
534,636
534,636
522,999
522,999
1,057,635
1,057,635
As at 31 December 1996, in accordance with IAS 29.24 and 29.25 the share capital and share premium were revalued on a basis of monthly
general price indices.
21.2.Share premium
Share premium is the surplus of the issuance value over the nominal value of shares belonging to series B, C and D.
Nominal share premium
Share premium revaluation adjustment
as at
31/12/2012
as at
31/12/2011
1,058,450
1,058,450
168,803
168,803
1,227,253
1,227,253
The share premium as at 31 December 1996, in accordance with IAS 29 § 24 and 25 was revalued on a basis of monthly general price indices.
180
21.3.Hedging reserve
The amount of the hedging reserve results from valuation and settlement of derivatives meeting the requirements of cash flows hedge
accounting.
The Group uses cash flow hedge accounting to hedge the currency risk, interest rate risk and commodity risk arising from the Group’s
operations.
The Group designates derivatives as cash flow hedges. Changes in the fair value of the hedging instrument, which are an effective part
of the hedging relationship is recognized directly in equity as hedging reserve, while the ineffective part of the profit or loss on the hedging
instrument is recognized in the separate statement of profit or loss and other comprehensive income. Profit and losses included in equity
(effective hedge) at the time of recognition of an asset or liability arising from the hedged forecast transaction may be moved to:
• consolidated profit or loss and other comprehensive income or;
• the initial value of fixed assets and in future periods is recognized in the statement of profit or loss and other comprehensive income
as depreciation.
21.4.Revaluation reserve
Revaluation reserve comprises of the difference between the net book value and fair value of the property as at the date of reclassification
of the property occupied by the Group and recognised as an investment property.
21.5.Foreign exchange differences on subsidiaries from consolidation
The amount of foreign exchange differences on subsidiaries from consolidation is adjusted by foreign exchange differences resulting from
translation of the financial statements of foreign entities belonging to the Group from foreign currencies into PLN. Foreign exchange differences resulting from translation of bank loans liabilities denominated in USD, that are designated as net investment hedge in a foreign
operation, are also recognised in this position.
Additional information in case of hedge accounting of net investment hedge in a foreign operation is presented in note 35.6.3.
21.6.Retained earnings
as at
31/12/2012
as at
31/12/2011
20,951,298
18,605,124
883,740
883,740
2,344,594
2,363,397
24,179,632
21,852,261
as at
31/12/2012
as at
31/12/2011
1,669,234
1,953,228
Capital Group of ANWIL
35,412
117,532
Capital Group of Rafineria Trzebinia
Reserve capital
Other capital
Net profit for the period attributable to equity holders of the parent
21.7.Equity attributable to non-controlling interest
Capital Group of Unipetrol
55,150
51,423
Capital Group of Rafineria Nafty Jedlicze
69
14,100
Inowrocławskie Kopalnie Soli ”Solino” S.A.
56
2,928
Petrolot Sp. z o.o.
—
31,471
Other companies
67,725
94,228
1,827,646
2,264,910
In 2012 and 2011 equity attributable to non-controlling interest was adjusted by results attributable to non-controlling interests and paid
and declared dividends. Hedging reserve and revaluation reserve attributable to non-controlling interest was also considered. Additionally
the adjustments concerning the buy-out of non-controlling interest (changes in total voting rights of the Parent Company) were introduced.
181
21.8.Suggested distribution of the Parent Company’s profit for 2012
In line with the strategy of ORLEN Group for the years 2013 – 2017 the level of dividends will depend on the average share price of PKN
ORLEN for the previous year and includes the strategic objectives and maintaining secure financial ratios (such as net financial leverage,
net debt / operating profit before depreciation and amortization (EBITDA), and forecasts of the macroeconomic environment).
The target level of dividends is expected to be up to 5% of the average annual capitalization of PKN ORLEN in the previous year. Linking
dividend to an annualized share price decoupling the amount of momentary fluctuations in the share price.
This method does not require to link the level of dividends with the net profit, which in the refining industry is highly variable and often
contains non-monetary elements, such as the revaluation of inventories and loans, which are not fully reflecting the cash flow earn
by the Group.
Considering the average capitalization of PKN ORLEN in 2012 PLN 16,796,135 thousand, levels of financial leverage of 26.0% and net
debt / EBITDA of 1.58, the Management Board proposes to distribute the net profit for the year 2012 of PLN 2,127,797,966.06 as follows: the amount of PLN 641,563,591.50, e.g. 3.82% of average capitalization of the Parent Company will be allocated to the dividend
and remaining amount of PLN 1,486,234,374.56 to reserve capital of the Parent Company.
21.9.Distribution of the Parent Company’s profit for 2011
Pursuant to article 395 § 2 point 2 of the Commercial Companies Act and § 7 art. 7 point 3 of the Company’s Articles of Association,
on 30 May 2012 the Ordinary General Shareholders’ Meeting of PKN ORLEN S.A., having analyzed the motion of the Management Board,
decided to distribute the total net profit for 2011 of PLN 1,386,165,827.51 to the Parent Company’s reserve capital.
21.10. Capital management policy
Capital management is performed on the Group level in order to protect the Group’s ability to continue its operations as a going concern
while maximizing returns for shareholders.
The Management Board monitors the following ratios:
• net financial leverage (net debt to equity ratio) of the Group. As at 31 December 2012 and 31 December 2011 net financial leverage
amounted to 26.0% and 30.2%, respectively;
• net debt to profit before interest, taxes, depreciation and amortisation. As at 31 December 2012 and as at 31 December 2011 this ratio
for the Group amounted to 1.58 and 1.62, respectively;
• dividend per ordinary shares – dividend amount depends on current finance condition of the Group. In 2012 and 2011 no dividends
were paid. Description of dividends policy is disclosed in note 21.8.
Net debt = long- term loans and borrowings + short- term loans and borrowings – cash and cash equivalents
Net financial leverage = net debt / equity (recalculated according to average balance sheet value in the period ) x 100%
22. Loans, borrowings and debt securities
Long-term
Bank loans
Total
as at
31/12/2011
as at
31/12/2012
as at
31/12/2011
as at
31/12/2012
as at
31/12/2011
6,654,652
10,179,994
940,200
1,644,324
7,594,852
11,824,318
Borrowings
Debt securities
Short-term
as at
31/12/2012
1,078
—
480
10,055
1,558
10,055
1,022,716
357,798
353,961
805,420
1,376,677
1,163,218
7,678,446
10,537,792
1,294,641
2,459,799
8,973,087
12,997,591
The ORLEN Capital Group bases its financing on floating interest rate. Depending on the currency of financing these are WIBOR, LIBOR,
EURIBOR, PRIBOR and VILIBOR increased by margin. The margin reflects risk connected to financing of the Group and in case of long-term
contracts depends on net debt to EBITDA (result from operations increased by depreciation and amortisation).
22.1.Bank loans
• by currency (translated into PLN)
as at
31/12/2012
as at
31/12/2011
PLN
1,161,073
224,707
EUR
2,290,274
4,205,198
USD
3,867,718
7,061,057
CZK
273,716
332,323
2,071
1,033
7,594,852
11,824,318
LTL
182
• by interest rate
as at
31/12/2012
as at
31/12/2011
WIBOR
1,161,073
224,707
EURIBOR
2,290,274
4,205,198
LIBOR
3,867,718
7,061,057
PRIBOR
273,716
332,323
VILIBOR
2,071
1,033
7,594,852
11,824,318
At the end of the reporting period unused credit lines increased by current receivables (note 17) and cash and cash equivalents (note 19)
exceeded short-term liabilities (note 25) by PLN 8,213,417 thousand.
Group hedges cash flows related to interest payments regarding external financing in EUR and USD, by using interest rate swaps (IRS).
Additional information regarding loan amounts that were hedged with Capital Group’s assets is presented in note 28.
In the period covered by the foregoing consolidated financial statement as well as after reporting date there were no cases of violations
of loans or interests repayment nor breaches of covenants.
22.2.Borrowings
• by currency
PLN
as at
31/12/2012
as at
31/12/2011
1,558
10,055
1,558
10,055
as at
31/12/2012
as at
31/12/2011
1,558
10,055
1,558
10,055
WIBOR
In the period covered by the foregoing consolidated financial statements as well as after reporting date there were no cases of violations
of borrowings agreements.
22.3.Debt securities
• by currency (translated into PLN)
PLN
CZK
as at
31/12/2012
as at
31/12/2011
1,022,716
763,428
353,961
399,790
1,376,677
1,163,218
Fixed rate bonds
Floating rate bonds
Total
as at
31/12/2012
as at
31/12/2011
as at
31/12/2012
as at
31/12/2011
as at
31/12/2012
as at
31/12/2011
Nominal value
326,000
342,200
1,000,000
750,000
1,326,000
1,092,200
Carrying amount
353,961
399,790
1,022,716
763,428
1,376,677
1,163,218
2013-12-28
2013-12-28
2019-02-27
2012-02-27
—
—
none
none
none
none
—
—
Expiration date
Type of collateral
183
23. Provisions
Long-term
Short-term
Total
as at
31/12/2012
as at
31/12/2011
as at
31/12/2012
as at
31/12/2011
as at
31/12/2012
as at
31/12/2011
Environmental provision
327,555
292,413
45,845
42,416
373,400
334,829
Jubilee and post-employment benefits provision
279,427
254,568
34,886
36,604
314,313
291,172
20,818
26,903
58,983
67,488
79,801
94,391
Shield programs provision
Business risk provision
—
2,365
42,379
64,704
42,379
67,069
Provision for CO2 emission
—
—
378,009
542,054
378,009
542,054
Other
32,479
45,130
242,617
254,874
275,096
300,004
660,279
621,379
802,719
1,008,140
1,462,998
1,629,519
Change in provisions in 2012
Jubilee and
post-employEnvironmental ment benefits
provision
provision
1 January 2012
Recognition
Usage
Reversal
Discounting
Foreign exchange
differences
Business risk
provision
Shield
programs
provision
Provision for
CO2 emission
Other
provisions
Total
334,829
291,172
94,391
67,069
542,054
300,004
1,629,519
70,608
52,139
22,111
9,303
388,490
139,125
681,776
(22,276)
(24,706)
(10,190)
(24,899)
(537,861)
(13,969)
(633,901)
(5,615)
(2,191)
(21,442)
(8,094)
(2,294)
(132,305)
(171,941)
—
—
—
—
—
(25)
(25)
(4,146)
(2,101)
(5,069)
(1,000)
(12,380)
(17,734)
(42,430)
373,400
314,313
79,801
42,379
378,009
275,096
1,462,998
Jubilee and
post-employEnvironmental ment benefits
provision
provision
Business risk
provision
Shield
programs
provision
Provision for
CO2 emission
Other
provisions
Total
Change in provisions in 2011
1 January 2011
365,134
275,790
120,408
41,426
644,703
190,585
1,638,046
5,978
39,922
26,175
40,637
558,475
165,679
836,866
Usage
(28,224)
(23,247)
(11,515)
(15,144)
(669,023)
(45,224)
(792,377)
Reversal
(15,017)
(4,803)
(44,115)
—
(18,450)
(36,820)
(119,205)
—
—
—
—
—
(2,860)
(2,860)
6,958
3,510
3,438
150
26,349
28,644
69,049
334,829
291,172
94,391
67,069
542,054
300,004
1,629,519
Recognition
Discounting
Foreign exchange
differences
Additional information regarding provisions that were hedged by Capital Group’s assets is presented in note 28.
23.1.Environmental provision
The Group has legal obligation to clean contaminated land – water environment in the area of production plants, petrol stations, fuel
terminals and warehouses.
As the Czech Republic is concerned, the Government of the Czech Republic is responsible for liabilities arising from contamination of landwater environment before date of entity’s privatization (so called Old Ecological Burdens). In case of new contamination that arose after
date of the entity’s privatization the Group is responsible for those liabilities.
The potential future changes in regulation and common practice regarding environmental protection may influence the value of this
provision in the future periods.
184
In 2012, the value of the environmental provision has increased mainly due to increase in the rate of remediation processes at petrol stations
and a substantial increase in the average remediation cost of fuel stations. Environmental provision estimated based on the assumptions
for the year 2011 would be lower by PLN 15,191 thousand.
Additional information regarding estimation of provision for environmental risk is presented in note 3.3.17.1.
23.2.Provision for jubilee bonuses and post-employment benefits
Change in employee benefits obligations in 2012
Note
Jubilee bonuses provision
Post-employment benefits
Total
161,309
129,863
291,172
11,253
5,341
16,594
7,792
6,058
13,850
18,194
870
19,064
1 January 2012
Current service cost
Interest expense
Actuarial gains and losses net
Benefits paid
(19,397)
(6,829)
(26,226)
Past service cost
841
745
1,586
Change in share structure
335
53
388
(743)
(1,372)
(2,115)
179,584
134,729
314,313
Jubilee bonuses provision
Post-employment benefits
Total
23
Change in employee benefits obligations in 2011
Note
1 January 2011
155,177
120,613
275,790
9,310
4,230
13,540
Interest expense
8,336
6,966
15,302
Benefits paid
Change in ownership structure
Cost of past benefits
23
5,037
3,353
8,390
(18,148)
(8,181)
(26,329)
18
—
18
1,579
1,761
3,340
—
1,121
1,121
161,309
129,863
291,172
The carrying amount of employment benefits liabilities is identical to their present value as at 31 December 2012 and 31 December 2011.
As at
Note
Present value of the above mentioned employee benefits obligation
31/12/2012
23
314,313
31/12/2011
23
291,172
31/12/2010
275,790
31/12/2009
261,531
31/12/2008
283,988
Total expense recognised in profit or loss
for the year ended
31/12/2012
for the year ended
31/12/2011
(16,594)
(13,540)
Interest expense
(13,850)
(15,302)
(19,064)
(8,390)
Past employment costs
Past service cost
(1,586)
—
—
(1,121)
(51,094)
(38,353)
185
The above mentioned costs are included in the following positions in the statement of proft or loss
and other comprehensive income
Cost of sales
for the year ended
31/12/2012
for the year ended
31/12/2011
(4,653)
(5,284)
(38,488)
(28,718)
(7,953)
(4,351)
(51,094)
(38,353)
In 2012 the amount of provision for employee benefits changed as the result of update of assumptions, mainly in discount rate, projected
inflation and expected remuneration increase ratio. Should the prior year assumptions be used, the provision for the employee benefits
would be higher by PLN 7,131 thousand.
For the Polish entities, in order to update the provision for employee benefits as at 31 December 2012, the Group used the following
actuarial assumptions: discount rate of 4%, expected inflation: 2.7% in 2013 and 2.5% in following years and the remuneration increase
rate in ORLEN Group: 0% in 2013-2017 and 2.5% in subsequent years.
For the Group’s foreign entities, major impact on the update of the provision for employee benefits as at 31 December 2012 had the discount rate, which ranged from 2.86 to 4.5%.
Based on existing regulations the Group is obliged to make contributions to the national retirement and pension plans. These expenses
are recognised as employee benefit costs. There are no other obligations as far as employee benefits are concerned.
Additional information regarding the payment of jubilee bonuses and post-employment benefits is presented in note 3.3.17.2.
23.3.Business risk provision
Decrease in business risk provison in 2012 resulted mainly from revision of status of administrative and court proceedings concerning land use.
23.4.Shield programs provision
Employee shield programs were launched to support the restructuring processes conducted in the Group. Depending on particular company the programs provide i.a. additional severances, training packages for employees with whom the employment agreement was or
would be dissolved and relocation packages for the employees, who agreed to change the workplace comprising of relocation bonus
and refund of relocation costs.
In 2012 the assumptions used in calculation of shield programs provision did not change in comparison to those used prior year.
23.5.Provision for CO2 emission
The Group recognises provision for estimated CO2 emissions in the reporting period. The cost of recognised provision is compensated
with settlement of deferred income on CO2 emission rights granted free of charge. The description of the accounting principles applied
is disclosed in note 3.3.8.2. and 35.7.3.4.
23.6.Other provisions
As at 31 December 2012 and as at 31 December 2011 other provisions comprise mainly provisions for tax liabilities of PLN 121,558
thousand and PLN 114,671 thousand, respectively and provisiond for negative outcome of legal proceedings of PLN 50,319 thousand
and PLN 57,094 thousand, respectively.
186
24. Other long-term liabilities
as at
31/12/2012
as at
31/12/2011
72,847
113,602
interest rate swaps
60,487
113,602
foreign currency-interest rate swaps
12,360
—
Investment liabilities
726
1,310
Financial lease
74,829
69,336
Other
18,349
15,955
166,751
200,203
4,258
3,479
171,009
203,682
as at
31/12/2012
as at
31/12/2011
8,815,143
10,984,529
641,759
586,144
Financial liabilities
Non-financial liabilities
25. Trade and other libabilities
Trade liabilities
Dividend
Financial lease liabilities
Uninvoiced services
Other
Prepayments for deliveries
Payroll liabilities
Environmental liabilities
Special funds
Excise tax and fuel charge
Value added tax
Other taxation, duties, social security and other benefits
6,156
6,761
27,075
28,579
118,139
80,840
76,570
76,368
9,684,842
11,763,221
21,105
61,876
223,879
223,353
9,633
10,588
13,047
12,725
1,479,195
1,720,017
849,354
899,070
94,393
98,538
270,917
295,547
holiday pay accrual
54,046
50,351
customers' discounts and rebates
99,554
100,986
117,317
144,210
9,526
7,589
2,971,049
3,329,303
12,655,891
15,092,524
Accruals
liabilities due to reimbursement of excise tax cost to suppliers providing
tax warehouse services
Other liabilities
Non-financial liabilities
Trade and other liabilities denominated in foreign currencies as at 31 December 2012 and 31 December 2011 amounted to PLN 8,944,862
thousand and PLN 10,549,206 thousand, respectively.
The currency structure of financial liabilities was disclosed in note 35.7.3.1.
Trade and other liabilities related to exploration and extraction of hydrocarbons/salt as at 31 December 2012 and 31 December 2011
amounted to PLN 48,846 thousand and PLN 43,864 thousand, respectively.
Additional information regarding trade and other liabilities that were hedged with Capital Group’s assets is presented in note 28.
187
26. Deferred income
as at
31/12/2012
as at
31/12/2011
Long-term
15,321
16,239
Government grant
15,003
15,781
318
458
Other
Short-term
168,305
136,379
Government grants
76,358
41,864
VITAY Program
74,684
72,632
Others
17,263
21,883
183,626
152,618
VITAY is a loyalty program created for individual customers, operating on the Polish market since 2001. Purchases made by customers
under the program are granted with VITAY points that can be subsequently exchanged for gifts or selected products discounts, including
fuels (source: http://www.vitay.pl). Additional information about the VITAY program is presented in note 4.2.
26.1.Government grants
as at
31/12/2012
as at
31/12/2011
Granted free of charge CO2 emission rights
60,180
39,938
National Environmental Protection Fund and European Regional Development Fund
31,181
17,707
91,361
57,645
as at
31/12/2012
as at
31/12/2011
92,695
150,258
6,435
147,718
921
1,506
27. Other financial liabilities
interest rate swaps
commodity swap
Derivatives not designated as hedge accounting
foreign currency-interest rate swap
commodity swap
currency swaps
188
85,339
1,034
29,202
284,810
10,514
264,420
5,241
14,453
13,447
5,937
99
7,240
99
7,240
121,996
442,308
28. Information about established collaterals
as at 31.12.2012
as at 31.12.2011
Assets pledged
as collateral
for liabilities
Liabilities
secured
by assets
Assets pledged
as collateral
for liabilities
Liabilities
secured
by assets
1,384,933
396,089
1,266,419
402,153
pledge on property, plant and equipment
609,012
182,170
543,566
192,188
pledge on inventories
180,572
78,579
185,008
65,328
cession of receivables
432,968
104,127
406,860
109,190
cash in bank pledged as collateral
162,381
31,213
130,985
35,447
177,691
212,526
99,532
189,539
Loans
Other
Position other regards property, plant and equipment, inventories, deposits and cash deposits which are recognised as collateral of trade
payables and provisions related to tax proceedings.
Additionally, in the Capital Group as at 31 December 2011 tangible fixed assets of the net book value of PLN 29,012 thousand and cash
of PLN 10,247 thousand, pledged as collateral for overdrafts, which value as at 31 December 2011 was zero.
In 2012 there were no property, plant and equipment or cash pledged as collateral for overdrafts, which value was zero.
The above mentioned collaterals concern mainly bank loans of the Group entities and can be overtaken by the lender in case of absence
of timely repayments of capital and interest. So far, such situation has not occurred and no risk was identified that such situation may
occur in the foreseeable future.
29. Sales revenues
Sales of finished goods
Sales of services
for the year ended
31/12/2012
for the year ended
31/12/2011
92,033,309
82,983,039
1,692,556
1,660,422
Revenues from sales of finished goods and services, net
93,725,865
84,643,461
Sales of merchandise
23,693,629
21,862,019
Sales of raw materials
2,682,056
467,594
26,375,685
22,329,613
120,101,550
106,973,074
for the year ended
31/12/2012
for the year ended
31/12/2011
Costs of finished goods and services sold
(87,025,549)
(77,296,657)
Cost of merchandise and raw materials sold
(25,068,441)
(21,101,154)
(112,093,990)
(98,397,811)
Revenues from sales of merchandise and raw materials, net
30. Operating expenses
30.1. Cost of sales
189
30.2. Cost by kind
for the year ended
31/12/2012
for the year ended
31/12/2011
Materials and energy
(83,685,528)
(73,601,514)
Cost of merchandise and raw materials sold
(25,068,441)
(21,101,154)
(4,276,067)
(4,110,251)
Note
External services
Employee benefits
Depreciation and amortisation
30.3.
(2,154,175)
(2,078,987)
7,9.1.,9.2.,10
(2,260,122)
(2,379,948)
(496,170)
(440,619)
Taxes and charges
Other
(1,751,586)
(2,797,574)
(119,692,089)
(106,510,047)
for the year ended
31/12/2012
for the year ended
31/12/2011
Change in inventories
570,958
372,712
Cost of products and services for own use
317,551
224,078
Operating expenses
(118,803,580)
(105,913,257)
3,871,660
3,660,256
1,523,632
1,468,298
Note
31.2.
Cost of sales
1,314,298
2,386,892
(112,093,990)
(98,397,811)
In 2012 and in 2011 external services included research and development expenditures of PLN (29,184) thousand and PLN (14,927)
thousand, respectively.
In 2012 and in 2011 cost by kind included costs associated with the exploration and extraction of hydrocarbons/salt of PLN (65,954)
thousand and PLN (60,248) thousand, respectively.
30.3.Employee benefits costs
Note
for the year ended
31/12/2012
for the year ended
31/12/2011
(1,642,176)
(1,617,323)
Future benefits expenses
Payroll expenses
(23,141)
(6,684)
Social security expenses
(363,153)
(344,757)
Other employee benefits expenses
(125,705)
(110,223)
(2,154,175)
(2,078,987)
for the year ended
31/12/2012
for the year ended
31/12/2011
30.2.
Future benefits include the change in provisions for jubilee bonuses and retirement benefits.
31. Other operating revenues and expenses
31.1.Other operating revenues
Note
Profit on sale of non-current non-financial assets
Reversal of provisions
56,446
85,832
129,817
Reversal of receivables impairment allowances
17
61,285
Reversal of impairment allowances of property, plant and equipment and
intangible assets
15
99,432
60,656
81,814
301,054
8,228
20,628
341,417
352,222
726,401
1,006,655
Penalties and compensations earned
Grants
Other
190
32,857
101,368
The line “other” in 2012 and in 2011 includes the effect of the settlement of CO2 emission rights received free of charge, in relation
to actual emission, as well as recalculation of provision for CO2 emissions as a result of changes in rights’ prices of PLN 137,981 thousand
and PLN 259,612 thousand, respectively.
In 2012 and in 2011, in the line “other” the Group mainly recognized the effect of energy rights recognition in relation to the fulfillment
by PKN ORLEN of requirements related to high-efficiency cogeneration in electricity production of PLN 130,032 thousand and PLN 21,045
thousand, respectively.
31.2.Other operating expenses
Note
Loss on sale of non-current non-financial aasets
Recognition of provisions
Recognition of receivables impairment allowances
17
Recognition of other impairment allowances
Recognition of impairment allowances of property, plant and equipment
and intangible assets
15
Costs of losses, breakdowns and compensations
Other
for the year ended
31/12/2012
for the year ended
31/12/2011
(66,315)
(67,269)
(127,258)
(136,892)
(92,641)
(114,992)
—
(237)
(865,703)
(1,855,850)
(32,484)
(42,806)
(129,897)
(168,846)
(1,314,298)
(2,386,892)
In 2012 and in 2011 the line “other” included mainly update of provision for CO2 emissions, the inventory differences settlement and costs
of current assets liquidation of PLN (54,913) thousand and of PLN (66,533) thousand, respectively. Additional information on impairment
allowances is disclosed in notes 7, 9 and 10.
32. Financial revenues and expenses
32.1.Financial revenues
for the year ended
31/12/2012
for the year ended
31/12/2011
Interest
152,733
82,870
Foreign exchange gain surplus
929,082
320,287
Note
Profit from sale of shares
Decrease in receivables impairment allowances
6.2.2,17
Settlement and valuation of financial instruments
Financial assets available for sale valuation
6.2.2,15
Other
—
2,278,528
7,818
8,541
481,654
68,110
478
320
10,229
21,489
1,581,994
2,780,145
for the year ended
31/12/2012
for the year ended
31/12/2011
(355,718)
(369,219)
(76,878)
(1,391,515)
(14,793)
(12,942)
(484,738)
(405,696)
(184)
(2,070)
(48,915)
(61,733)
(981,226)
(2,243,175)
32.2.Financial expenses
Note
Interest
Foreign exchange loss surplus
Recognition of receivables impairment allowances
6.2.2,17
Settlement and valuation of financial instruments
Financial assets available for sale valuation
Other
6.2.2,15
According to IAS 23 Borrowing cost, the Group capitalizes those borrowing costs, that are directly attributable to the acquisition, construction or production of a qualifying asset, as part of the cost of that asset. Borrowing costs capitalized in 2012 and in 2011 amounted
to PLN (21,255) thousand and PLN (53,480) thousand, respectively. In 2012 and in 2011 capitalization rate that was used to calculate
borrowing costs capitalization amounted to 2.05% per annum and 3.04% per annum, respectively.
191
33. Income tax expense
for the year ended
31/12/2012
for the year ended
31/12/2011
(452,427)
(1,000,215)
(2,026)
223,477
(454,453)
(776,738)
10,373
22,088
(623)
(1,974)
9,750
20,114
(444,703)
(756,624)
Income tax expense in the statement of profit or loss
Current income tax
Deferred income tax
Income tax expense in other comprehensive income
Hedging instruments
Investment property valuation to fair value at the moment of reclassification
33.1. The differences between income tax expense recognised in profit or loss and the amount calculated
based on profit before tax
for the year ended
31/12/2012
for the year ended
31/12/2011
Profit before tax
2,624,443
2,791,741
Corporate income tax for 2012 and 2011 by the valid tax rate (19% in Poland)
(498,644)
(530,431)
(6,097)
(23,098)
Lithuania (15%)
4,652
(12,743)
Germany (29%)
(10,749)
(10,355)
(132)
35,632
(11,265)
(183,676)
Deferred tax asset on tax losses carried forward
91,995
—
Energy rights granted free of charge
23,859
4,005
—
(44,246)
(54,169)
(34,924)
(454,453)
(776,738)
17%
28%
Differences between tax rates
Valuation of entities accounted for under equity method
Tax losses
The difference in the tax value of shares of entities accounted under equity method
Other
Income tax
Effective tax rate
The line other in 2012 and in 2011 includes mainly the effect of revaluation of tax value of non-monetary assets in Orlen Lietuva due
to changes in LTL/USD exchange rates.
As at 31 December 2012 and as at 31 December 2011 the Group recognised unsettled tax loss of PLN 117,515 thousand and PLN 1,281,098
thousand, respectively, for which no deferred tax asset was recognised. Unsettled tax losses in 2011 are a result of recognised impairment
allowance of assets and include companies from Unipetrol Group and ANWIL Group.
192
33.2.Deferred tax
Change in deferred tax liability, net
as at
31.12.2011
Foreign exchange
Deferred tax
Deferred tax
differences
recognized recognized in other recognized in other
in statament
comprehensive
comprehensive
of profit or loss
income
income
as at
31.12.2012
Deferred tax assets
290,406
169,033
—
(7,677)
451,762
Provisions and accruals
276,165
23,899
—
(4,027)
296,037
Unrealized foreing exchange
differences
275,439
(145,248)
—
(67,352)
62,839
47,772
(11,350)
—
(2,923)
33,499,
Difference between carrying amount
nad tax base of property plant
and equipment
Tax loss
224,207
83,792
—
(14,188)
293,811
Valuation and settlement of financial
instruments
61,589
(50,400)
10,373
(53)
21,509
Other
49,188
14,793
(623)
(3,412)
59,946
1,224,766
84,519
9,750
(99,632)
1,219,403
69,157
14,344
—
—
83,501
1,406,656
77,152
—
(54,999)
1,428,809
42,869
—
—
—
42,869
—
15
—
(15)
—
Deferred tax liabilities
Investment relief
Difference between carrying amount
nad tax base of property plant and
equipment
Surplus of contribution in kind over
the value of shares
Valuation and settlement of financial
instruments
Other
47,468
(4,966)
—
(3,614)
38,888
1,566,150
86,545
—
(58,628)
1,594,067
341,384
2,026
(9,750)
41,004
374,664
The above positions of deferred tax assets and liabilities are netted of compensation on the level of particular financial statements
of the Group companies for presentation purposes in the consolidated financial statement of ORLEN Capital Group. As at 31 December
2012 deferred tax assets and liabilities amounted to PLN 296,939 thousand and PLN 671,603 thousand, respectively.
193
34. Explanatory notes to the statement of cash flows
Explanation of differences between changes in the statement of financial position captions and changes
presented in the statement of cash flows
for the year ended
31/12/2012
for the year ended
31/12/2011
Change in other non-current assets and trade and other receivables presented
in the statement of financial position
(28,190)
(1,764,045)
Change in investment receivables from:
120,375
(53,704)
advances for construction in progress
106,184
(22,516)
(770)
(12,820)
(4,104)
(22,250)
sale of non-current non-financial assets
granted long-term borrowings
energy rights granted free of charge
ERU granted free of charge
Change in cash flow hedge instruments
Change in prepayments regarding bank commisions
31,484
3,882
(12,419)
—
27,990
81
(13,153)
34,762
(238,052)
473,862
(4,521)
(10,140)
Change in receivables in the statement of cash flows
(135,551)
(1,319,184)
Change in inventories presented in the statement of financial position
1,285,470
(5,001,666)
4,773
24,929
Other
Reclassification of inventories from/to property, plant and equipment
and non-current assets held for sale
(271,246)
411,717
Change in inventories in the statement of cash flows
1,018,997
(4,565,020)
(2,469,306)
1,770,533
Change in other long-term liabilities, trade liabilities and other liabilities presented
in the statement of financial position
Change in investment liabilities from investment expenditures
(55,031)
294,519
Change in cash flow hedge instruments
40,755
(110,196)
Change in financial liabilities
(3,384)
(7,329)
458,652
(850,730)
6,124
(15,998)
(2,022,190)
1,080,799
Other
Change in liabilities in the statement of cash flows
Change in provisions presented in the statement of financial position
Usage of prior year for CO2 emission provision
Usage of prior year energy rights provision
Change in provisions in the statement of cash flows
(166,521)
(8,527)
537,921
669,590
2,687
—
46,533
(66,888)
420,620
594,175
for the year ended
31/12/2012
for the year ended
31/12/2011
Other adjustments in cash flows from operating activities
Change in deferred income
31,008
67,531
CO2 emission rights granted free of charge
(533,027)
(727,722)
Energy rights granted free of charge
(130,032)
(21,945)
(1,008)
(38,263)
(633,059)
(720,399)
Other
In the statement of cash flows, net cash used in investing activities in 2012 and 2011 include the effects of exploration and evaluation
of mineral resources of hydrocarbons/salt of PLN (98,991) thousand and PLN (106,095) thousand, respectively.
194
35. Financial instruments
35.1.Financial instruments by category and class
Financial assets
Financial instruments by category
Financial instruments by class
Note
Financial
assets at
fair value
through
profit or loss
Quoted shares
13,18
—
—
1,078
—
1,078
13
—
—
39,824
—
39,824
Unquoted shares
Loans and
receivables
Financial
assets
available
for sale
Hedging
financial
instruments
Total
Deposits
18
—
22,262
—
—
22,262
Trade receivables
17
—
6,897,977
—
—
6,897,977
Borrowings granted
14,18
—
284,696
—
—
284,696
Embedded derivatives and hedging
instruments
14,18
23,527
—
—
74,562
98,089
19
—
2,211,425
—
—
2,211,425
14,17,18
—
142,460
—
—
142,460
23,527
9,558,820
40,902
74,562
9,697,811
Other
Note
Financial
assets at
fair value
through
profit or loss
Quoted shares
13,18
—
Loans and
receivables
Financial
assets
available
for sale
Hedging
financial
instruments
Total
—
793
—
793
Unquoted shares
13
—
—
39,830
—
39,830
Deposits
18
—
15,197
—
—
15,197
Trade receivables
17
—
7,055,689
—
—
7,055,689
Borrowings granted
14,18
—
17,156
—
—
17,156
instruments
14,18
48,183
—
—
225,991
274,174
19
—
5,409,166
—
—
5,409,166
14,17,18
—
116,097
—
—
116,097
48,183
12,613,408
40,623
225,991
12,928,102
Other
195
Note
Financial
liabilities
at fair value
through
profit or loss
Debt securities
22.3.
—
1,376,677
—
—
1,376,677
Financial
liabilities
measured
at amortised
cost
Liabilities
Hedging excluded from
financial
the scope
instruments
of IAS 39
Total
Loans
22.1.
—
7,594,852
—
—
7,594,852
Borrowings
22.2.
—
1,558
—
—
1,558
Finance lease
24,25
—
—
—
101,9045
101,904
25
—
8,815,143
—
—
8,815,143
24,25
—
642,485
—
—
642,485
truments
24,27
29,301
—
165,542
—
194,843
Trade liabilities
Other
24,25,27
—
219,214
—
—
219,214
29,301
18,649,929
165,542
101,904
18,946,676
Financial
liabilities
measured
at amortised
cost
Note
Financial
liabilities
at fair value
through
profit or loss
Debt securities
22.3.
—
1,163,218
—
—
1,163,218
Loans
22.1.
—
11,824,318
—
—
11,824,318
Total
Borrowings
22.2.
—
10,055
—
—
10,055
Finance lease
24,25
—
—
—
97,915
97,915
25
—
10,984,529
—
—
10,984,529
24,25
—
587,454
—
—
587,454
24,27
292,050
—
263,860
—
555,910
24,25,27
—
179,924
—
—
179,924
292,050
24,749,498
263,860
97,915
25,403,323
Trade liabilities
and hedging instruments
Other
196
Liabilities
Hedging excluded from
financial
the scope
instruments
of IAS 39
35.2. Income and expense, profit and loss in the consolidated statement of profit or loss and other comprehensive
income
Note
Financial
assets and
liabilties at
fair value
through profit or loss
Loans and
receivables
Financial
assets
available
for sale
Interest revenue
32
—
152,733
—
—
Interest expense
32
—
(11,601)
—
Foreign exchange gain/loss
32
—
(443,918)
other operating revenues/
expenses
31
—
financial revenues/
expenses
Financial
liabilities
measured at
Hedging
amortised
financial
cost instruments
Liabilities
excluded
from the
scope of
IAS 39
Total
—
—
152,733
(283,364)
(53,918)
(6,835)
(355,718)
—
1,287,291
9,270
(439)
852,204
(19,706)
—
—
—
—
(19,706)
Recognition/reversal
of receivables impairment
allowances recognized in:
32
—
(6,975)
—
—
—
—
(6,975)
Settlement and valuation
of financial instruments
32
(2,473)
—
—
—
(611)
—
(3,084)
Valuation of financial assets
available for sale
32
—
—
294
—
—
—
294
Other
32
—
(13,557)
1,765
(20,661)
—
—
(32,453)
(2,473)
(343,024)
2,059
983,266
(45,259)
(7,274)
587,295
other, excluded from the scope
of IFRS 7
Provisions discounting
32
(6,233)
31
(11,650)
other operating
revenues/expenses
(17,883)
Note
Financial
assets and
liabilties at
fair value
Loans and
receivables
Financial
assets
available
for sale
Financial
liabilities
measured at
Hedging
amortised
financial
cost instruments
Liabilities
excluded
from the
scope of
IAS 39
Total
Interest revenue
32
—
82,870
—
—
—
—
82,870
Interest expense
32
—
(8,942)
—
(300,551)
(53,009)
(6,717)
(369,219)
Foreign exchange gain/loss
32
—
571,630
—
(1,722,756)
79,907
(9)
(1,071,228)
expenses
31
—
14,769
—
—
—
—
14,769
financial revenues/
expenses
32
—
(4,401)
—
—
—
—
(4,401)
32
(336,777)
—
—
—
(809)
—
(337,586)
Settlement and valuation
of financial instruments
Valuation of financial assets
available for sale
32
—
—
(1,750)
—
—
—
(1,750)
Other
32
—
(22,382)
1,287
(19,201)
—
—
(40,296)
(336,777)
633,544
(463)
(2,042,508)
26,089
(6,726) (1,726,841)
197
35.2. Income and expense, profit and loss in the consolidated statement of profit or loss and other comprehensive
income, continued
Note
Financial
assets and
liabilties at
fair value
Loans and
receivables
Financial
assets
available
for sale
Financial
liabilities
measured at
Hedging
amortised
financial
cost instruments
Liabilities
excluded
from the
scope of
IAS 39
Total
other, excluded from the scope of IFRS 7
Profit on sale of shares and
other securities
32
2,278,528
Provisions discounting
32
52
31
56
Recognition/reversal of
receivables impairment
expenses
2,278,636
35.3.Financial expenses due to impairment of financial assets by class of financial instruments
Quoted shares
Note
for the year ended
31/12/2012
for the year ended
31/12/2011
32.2.
(184)
(1,816)
—
(254)
(14,793)
(12,942)
(14,977)
(15,012)
Unquoted shares
Trade receivables
32.2.
35.4.Fair value of financial instruments
as at 31.12.2012
Note
fair value
as at 31.12.2011
carrying amount
fair value
carrying amount
Financial assets
Quoted shares
Unquoted shares
Deposits
Trade receivables
13,18
1,078
1,078
793
793
13, 35.4.1.
—
39,824
—
39,830
18
22,262
22,262
15,197
15,197
17
6,897,977
6,897,977
7,055,689
7,055,689
Loans granted
14,18
284,696
284,696
18,600
17,156
14,18
98,089
98,089
274,174
274,174
19
2,211,425
2,211,425
5,409,166
5,409,166
14,17,18
142,460
142,460
114,801
116,097
9,657,987
9,697,811
12,888,420
12,928,102
Other
Debt securities
22.3.
1,378,801
1,376,677
1,163,231
1,163,218
Loans
22.1.
7,595,157
7,594,852
11,825,916
11,824,318
Borrowing
22.2.
1,558
1,558
10,055
10,055
Finance lease
24,25
92,565
101,904
90,558
97,915
25
8,815,143
8,815,143
10,984,529
10,984,529
24,25
642,485
642,485
587,454
587,454
24,27
194,843
194,843
555,910
555,910
24,25,27
219,214
219,214
179,924
179,924
18,939,766
18,946,676
25,397,577
25,403,323
Trade liabilities
Other
198
35.4.1. Financial instruments for which fair value cannot be measured reliably
As at 31 December 2012 and as at 31 December 2011 the Group held unquoted shares in entities, for which fair value cannot be reliably
measured, due to the fact that there are no active markets for these entities and no comparable transactions in the same type of instruments were noted. The value of shares was recognised in the consolidated statement of financial position of PLN 39,824 thousand and
PLN 39,830 thousand at acquisition cost less impairment allowances. As at the period end there are no binding decisions relating to ways
and dates of disposal of those assets.
35.4.2. Methods applied in determining fair values of financial instruments recognised in the consolidated
statement of financial position at fair value (fair value hierarchy)
The Group measures derivative instruments at fair value using valuation models for financial instruments based on generally available
exchange rates, interest rates, forward and volatility curves, for currencies and commodities quoted on active markets. As compared
to the previous reporting period the Group has not changed valuation methods concerning derivative instruments.
Fair value of derivatives is based on discounted future flows related to contracted transactions as a difference between term price and
transaction price. Forward rates of exchange are not modeled as a separate risk factor, but they are as a result of spot rate and forward
interest rate for foreign currency in relation to PLN.
Derivative instruments are presented as assets, when their valuation is positive and as liabilities, when their valuation is negative. Gains
and losses resulting from changes in fair value of derivative instruments, for which hedge accounting is not applicable, are recognised
in a current year profit or loss.
Fair value of shares quoted on active markets is determined based on market quotations (so called Level 1). In other cases, fair value is determined based on other input data, apart from market quotations, which are directly or indirectly possible to observe (so called Level 2).
35.4.3. Fair value hierarchy
as at 31.12.2012
as at 31.12.2011
Note
Level 1
Level 2
Level 1
Level 2
Quoted shares
13,18
1,078
—
793
—
14,18
—
98,089
—
274,174
1,078
98,089
793
274,174
—
194,843
—
555,910
—
194,843
—
555,910
Financial assets
24,27
During the reporting period and comparative period there were no reclassifications of financial instruments in the Capital Group between
Level 1 and Level 2 of fair value hierarchy.
35.4.4. Methods and assumptions applied in determining fair values of financial instruments presented
in consolidated statement of financial position at amortised cost
Financial liabilities due to debt securities issued, loans and borrowings and finance lease liabilities are measured at fair value using discounted cash flows method. Future cash flows are discounted using discount factors calculated based on market interest rates as at 31
December 2012 and as at 31 December 2011 according to quotations of 1-month, 3-months and 6-months interest rates increased
by proper margins for particular financial instruments. For the majority as at 31 December 2012 and as at 31 December 2011 1-month
interest rate quotations were applied.
as at
31/12/2012
as at
31/12/2011
WIBOR
4.2100%
4.7700%
EURIBOR
0.1090%
1.0240%
LIBOR
0.2087%
0.2953%
PRIBOR
0.3300%
0.9400%
VILIBOR
0.5100%
1.0600%
35.5.Financial assets pledged as collateral for liabilities or contingent liabilities
Information about the collaterals is presented in note 28.
199
35.6.Hedge accounting
35.6.1. Cash flow hedge accounting
The Group hedges its cash flows:
• relating to operating revenues due to sale of petrochemical and refinery products as well as operating expenses due to purchases
of crude oil against changes in exchange rates (EUR/PLN for sale and USD/PLN for purchases and sale),
• relating to investment projects (EUR/PLN, USD/PLN) against changes in exchange rates using foreign currency forwards,
• relating to sales/purchases of crude oil, gasoline, diesel, using commodity swaps,
• relating to interest payments concerning external financing in EUR and USD, using interest rate swaps (IRS). The Group converted
the PLN bonds to a fixed interest rate in EUR by using cross currency swaps (CCS).
Hedging transactions, which settlement and fair value measurement influences the foregoing consolidated financial statements were
concluded in the years 2009 – 2012.
The fair value of derivative instruments designated as hedging instruments according to cash flow hedge accounting, planned realization
date and planned date of the influence on the result of the hedged cash flow:
• net fair value which will be recognised in the profit or loss at the realization date
as at
31/12/2012
as at
31/12/2011
2012
—
(122,399)
2013
38,594
—
until 1 quarter 2012
—
(1,507)
(738)
—
(58,963)
(113,602)
(1,524)
—
(10,331)
—
2012
—
198,979
2013
(83,825)
—
2014
26,042
—
(90,745)
(38,529)
Planned realization date of hedged cash flow
Currency operating exposure
Interest rate exposure
Commodity risk exposure
As at 31 December 2012 and as at 31 December 2011 foreign exchange differences on hedged cash flow amounted to PLN (907) thousand and PLN (242) thousand, respectively, and were presented in line foreign exchange differences on subsidiaries from consolidation.
As at 31 December 2012 and as at 31 December 2011 the fair value as at date of settlement will be recognized in the profit attributable
to non-controlling interests amounted to PLN 703 thousand and PLN 5,909 thousand, respectively.
In case of interest rate exposure, the cross currency swap transactions are based on 6-month WIBOR, whereas the interest rate swaps
hedging loans denominated in EUR and USD are based on 1-month and 6-month EURIBOR and 1-month LIBOR.
• net fair value which will be included in the initial cost of property, plant and equipment at the settlement date,
and recognised in the profit or loss through depreciation charges in the following periods
as at
31/12/2012
as at
31/12/2011
2012 (currency investment exposure)
—
580
2013 (currency investment exposure)
(235)
79
(235)
659
Planned realization date of hedged cash flows
As at 31 December 2012 and as at 31 December 2011, in relation to cash flow hedges that meet the conditions for hedge accounting,
the ineffective part amounted to PLN (612) thousand and PLN (810) thousand, respectively.
200
35.6.2. Settlement of hedge instruments, which valuation had previously been recognized in the hedging reserve
for the year ended
31/12/2012
for the year ended
31/12/2011
Sales of products
74,979
(34,420)
28,210
96,524
(53,918)
(53,009)
Interest
Inventories
355
(1,185)
253,358
337,790
302,984
345,700
In respect to cash flow hedges that meet the conditions of hedge accounting, the ineffective part is recognised in profit or loss for 2012
and for 2011 of PLN 198 thousand and PLN 810 thousand, respectively.
35.6.3. Net investment hedge in a foreign operation
Starting from 2008 the Group uses net investment hedge in a foreign operation. Net investment hedge hedges currency risk of the portion
of net investment in a foreign operation that uses USD as its functional currency.
Financial liabilities denominated in USD were designated as an instrument hedging share in net assets of Orlen Lietuva Group. Negative
foreign exchange differences resulting from translation of these liabilities into PLN as at 31 December 2012 and as at 31 December 2011
amounted to PLN 693,950 thousand and PLN 986,728 thousand (including the impact of income tax), respectively, and were recognised
in equity in the line “Foreign exchange differences on subsidiaries from consolidation”.
35.7. Financial risk management
The Capital Group operations are exposed particularly to the following financial risks:
• credit risk,
• liquidity risk,
• market risks (including currency risk, interest rate risk, risk of changes in commodity prices, risk of changes in CO2 emission rights prices),
• other, disclosed in details in point 3.6. in the Management Board Report on the Operations of ORLEN Capital Group.
35.7.1. Credit risk
Within its trading activity the Capital Group sells products and services with deferred payment term, which may result in the risk that
customers will not pay for the Group’s receivables from sales of products and services. In order to minimize credit risk and working capital
the Group manages the risk by credit limit policies governing granting of credit limits to customers and establishment of pledges of appropriate types.
Each deferred payment term customer is individually assessed with regard to credit risk. A portion of trade receivables is insured within
an organized trade credit insurance program. Trade receivables are monitored by finance departments on a regular basis. In the event
of occurrence of overdue receivables, sale is withheld and debt recovery procedures implemented as described by the obliging procedures.
The established payment term of receivables connected with the ordinary course of sales amounts to 14 – 30 days.
Based on the analysis of receivables the customers were divided into two groups:
• I group – customers with good or very good history of cooperation in the current year;
• II group – other customers.
The division of not past due receivables based on the criteria described above
Note
as at 31.12.2012
as at 31.12.2011
(restated data)
Group I
5,403,937
5,609,465
Group II
874,546
920,950
6,278,483
6,530,415
17
201
The ageing analysis of financial assets past due, but not impaired as at the end of the reporting period
Note
as at
31/12/2012
as at
31/12/2011
622,467
513,577
From 1 to 3 months
30,965
39,688
From 3 to 6 months
13,212
8,803
Up to 1 month
From 6 to 12 months
Above 1 year
17
8,256
9,724
75,614
64,438
750,514
636,230
As at 31 December 2011 the Group reclassified the amount of PLN 426,870 thousand from short–term receivables up to 1 month, which
is overdue at the end of the reporting period, but not impaired to the receivables not overdue in Group I.
The concentration of risk connected with trade receivables is limited due to large number of customers with trade credit dispersed in various sectors of the Polish, German, Czech and Lithuanian economy.
Credit risk associated with cash and deposits is assessed by the Group as low. All entities in which the Group’s free cash is deposited, are
operating in financial sector. They include domestic banks and branches of foreign banks which have the highest short-term credit credibility (82% of deposited cash) or good credibility (18% of deposited cash).
Rating A-1 in Standard & Poor’s, F1 in Fitch and Prime-1 in Moodys are treated as the highest credibility, while A-2 and A-3 in Standard
& Poor’s, F2 and F3 in Fitch and Prime-2 and Prime-3 in Moodys are considered to be good credibility. The sources of information about
ratings are publications on web sites of each of the banks, in which the Group invests its free cash flows.
Credit risk associated with assets resulting from the positive valuation of derivative instruments is assessed by the Group as low, due
to the fact that all transactions are concluded with banks having high credit rating. One of the factors significant for bank choice is rating
on the level not lower than A.
The measure of credit risk is the maximum exposure to credit risk for each class of financial instruments. Maximum credit risk exposure
in relation to particular financial assets by category is equal to their carrying amount. In order to minimize the risk the Group as at 31
December 2012 and as at 31 December 2011 received bank and issuance guarantees of PLN 1,626,382 thousand and PLN 1,665,742
thousand, respectively. Additionally the Group receives from its customers securities such as blockade of cash on bank accounts, mortgage
and bills of exchange.
The Management Board believes that the risk of impaired financial assets is reflected by recognition of an impairment allowance. Information
about impairment allowances of particular classes of assets is disclosed in note 35.2. and 35.3.
The Group is exposed to credit risk associated with granted guarantees to contractors. The maximum level of exposure arising from
guarantees is the maximum amount that the Group would be obliged to pay for the guarantee payment in case a request was issued
by the business partner. The value of guarantees regarding liabilities to third parties granted during ongoing operations as at 31 December
2012 and as at 31 December 2011 amounted to PLN 456,952 thousand and PLN 498,229 thousand, respectively. These concern mainly:
contract performance guarantees, customs and deposits guarantees, payment guarantees. Based on the forecasts for the end of the reporting period, the Group concluded that the probability such payments can be described as low.
35.7.2. Liquidity risk
The goal of the Group is to maintain the balance between continuity and flexibility of financing. To achieve this goal the Group uses different sources of financing such as bank loans, borrowings, debt securities and cash pool.
The Group maintains the ratio of current assets to short-term liabilities (current ratio) on a safe level. As at 31 December 2012 and
as at 31 December 2011 ratio amounted to 1.7 and 1.5, respectively.
In 2007 the Group entered into Bond issuance program. Bond issues enable the Group to go out beyond traditional bank market and
to gain cash from other financial institutions, companies or natural persons. Bond Issuance Program is also used to manage liquidity within
the domestic and foreign entities of the Group. During 2012 and 2011 bond issues were made only on the domestic market.
In order to optimize financial expenses the Group uses cash pool facility. As at 31 December 2012 the domestic cash pool facility (in PLN)
comprised of 23 entities belonging to the Group, while cross border cash pool facility denominated in EUR, USD and PLN held in foreign
bank comprised PKN ORLEN and foreign entities belonging to Capital Group entities (Orlen Finance, ORLEN Lietuva, ORLEN Deutschland,
Unipetrol a.s. along with Unipetrol Group entities).
Information regarding loans, borrowings and debt securities were presented in note 22.
As at 31 December 2012 and as at 31 December 2011 the maximum possible indebtedness due to loans amounted to PLN 18,573,410
thousand and PLN 20,899,193 thousand, respectively, of which as at 31 December 2012 and as at 31 December 2011 PLN 10,804,527
thousand and PLN 7,562,831 thousand, respectively, remained unused.
202
Maturity analysis for financial liabilities
as at 31.12.2012
Note
Debt securities
22.3.
floating rate bonds- undiscounted
fixed rate bonds- undiscounted value
Loans- undiscounted value
22.1.
up to
from
from
1 year 1 to 3 years 3 to 5 years
353,961
—
above
5 years
Total
Carrying
amount
—
1,023,198
1,377,159
1,376,677
—
—
—
1,023,198
1,023,198
1,022,716
353,961
—
—
—
353,961
353,961
935,078
693,068
5,958,615
9,987
7,596,748
7,594,852
Borrowings - undiscounted value
22.2.
480
958
120
—
1,558
1,558
Finance lease
24,25
27,075
42,436
11,655
20,835
102,001
101,904
25
8,815,143
—
—
—
8,815,143
8,815,143
24,25
641,759
380
301
45
642,485
642,485
24,27
Trade liabilities
121,996
60,487
—
12,360
194,843
194,843
gross settled amounts
30,543
1,524
—
—
32,067
32,067
net settled amounts
91,453
58,963
—
12,360
162,776
162,776
Other
24,25,27
200,865
18,349
—
—
219,214
219,214
11,096,357
815,678
5,970,691
1,066,425
18,949,151
18,946,676
above
5 years
Total
Carrying
amount
—
1,163,381
1,163,218
as at 31.12.2011
Note
Debt securities
22.3.
floating rate bonds- undiscounted
fixed rate bonds- undiscounted value
Loans- undiscounted value
22.1.
up to
from
from
1 year 1 to 3 years 3 to 5 years
805,584
357,798
—
763,592
—
—
—
763,592
763,428
41,992
357,798
—
—
399,790
399,790
1,629,224
460,932
8,992,623
744,651
11,827,430
11,824,318
Borrowings - undiscounted value
22.2.
11,539
—
—
—
11,539
10,055
Finance lease
24,25
28,579
44,105
9,212
16,236
98,132
97,915
25
10,984,529
—
—
—
10,984,529
10,984,529
24,25
586,144
905
271
134
587,454
587,454
24,27
Trade liabilities
gross settled amounts
net settled amounts
Other
24,25,27
442,308
113,602
—
—
555,910
555,910
433,830
—
—
—
433,830
433,830
8,478
113,602
—
—
122,080
122,080
163,969
15,955
—
—
179,924
179,924
14,651,876
993,297
9,002,106
761,021
25,408,300
25,403,323
35.7.3. Market risks
The Capital Group applies consistent hedging policy to foreign exchange risk, interest rate risk and commodity risk. ORLEN Capital Group
manages the market risks arising from the above mentioned factors on the basis of market risk management policy, which sets out
the principles of measurement of individual exposure parameters and the time horizon of risk hedging and hedging instruments. The PKN
ORLEN market risk management policy is realized by designated organization units under the supervision of the Financial Risk Committee
of PKN ORLEN, the Management Board of PKN ORLEN and the Supervisory Board of PKN ORLEN. Management Boards of the individual
companies are responsible for risk management in the companies of the Capital Group under the supervision of the Supervisory Boards.
PKN ORLEN which under the relevant contracts has the power of attorney is responsible for the realization of hedging transactions
on the behalf of each of the Capital Group’s companies that remain under the coherent hedging policy.
The efficiency and execution of hedging transactions is monitored by the individual companies of the Capital Group.The effects are presented to the Financial Risk Committee of PKN ORLEN and the Management Board of PKN ORLEN through the Financial Management
Office of PKN ORLEN.
The objective of market risk management is to reduce the unfavorable effects of changes in market risk factors on the cash flow and
financial results in the short and medium term.
203
Market risk management is conducted using hedging strategies based on derivative instruments. Derivatives are used solely to reduce
the risk of changes in fair value and risk of changes in cash flows. ORLEN Capital Group applies only those instruments which can be
measured internally, using standard valuation models for given instrument. As far as market valuation of the instruments is concerned,
the Group relies on information obtained from market leading banks, brokers and information services. Transactions are concluded only
with reliable partners, authorized to participate in transactions through the application of appropriate procedures and signing the relevant
documentation.
35.7.3.1.Currency risk
The Group is exposed to currency risk resulting from current receivables and short-term liabilities, cash and cash equivalents, investment
expenditures as well as liabilities from loans and bonds issued denominated in foreign currencies as well as from future planned cash
flows from sales and purchases of refinery and petrochemical products and merchandise. Currency risk exposure is hedged by forward
or swap instruments.
For USD/PLN exchange rate there is partially a natural hedge, as revenues from sale of products denominated in USD are offset by costs
of crude oil purchases denominated in the same currency. For the EUR/PLN exchange rate, natural hedge exists to the limited extent because
the revenues from sales of products dependent on EUR exchange rate are partially balanced by the interests from loans and investment
purchases denominated in the same currency.
Currency structure of financial instruments as at 31 December 2012
EUR
USD
CZK
LTL
JPY
Other
currencies
after
translation
to PLN
—
7,182
—
—
—
—
22,262
455,118
225,410
6,042,730
167,905
—
—
3,743,057
746
11
59,282
—
—
—
12,747
7,910
16,383
24,365
3,768
—
—
91,573
87,472
340,301
2,827,614
26,166
—
4,859
1,909,141
by class
Total
after
translation
to PLN
Financial assets
Deposits
Trade receivables
Loans granted
Other
4,993
1,229
36,141
70,957
—
809
114,934
556,239
590,516
8,990,132
268,796
—
5,668
5,893,714
—
—
2,171,539
—
—
—
353,961
560,216
1,247,812
1,679,239
1,750
—
—
6,433,779
—
—
5,424
—
—
—
884
Debt securities
Loans
Finance lease
363,013
1,698,064
4,657,197
118,469
53,331
896
7,649,596
Trade liabilities
9,284
3,121
338,048
4,072
102,320
248
111,510
9,859
38,709
185,875
—
—
—
190,585
Other
6,428
9,531
211,594
14,117
—
2,591
109,617
948,800
2,997,237
9,248,916
138,408
155,651
3,735
14,849,932
Sensitivity analysis for currency risk
The influence of potential changes in carrying amounts of financial instruments (as at 31 December 2012) arising from hypothetical
changes in exchange rates of relevant currencies in relation to presentation currency (PLN) on profit before tax, hedging reserve and foreign
exchange differences on subsidiaries from consolidation:
Influence on profit before tax
Increase
of exchange rate
Total
influence
Decrease
of exchange rate
Total
influence
+15%
(274,013)
–15%
274,013
USD/PLN
+15%
(137,409)
–15%
137,409
JPY/PLN
+15%
(860)
–15%
860
EUR/PLN
(412,282)
204
412,282
Influence on hedging reserve
Increase
of exchange rate
Total
influence
Decrease
of exchange rate
Total
influence
EUR/PLN
+15%
USD/PLN
+15%
(265,289)
–15%
265,289
(5,768)
–15%
5,768
(271,057)
271,057
Influence of foreign operations on foreign exchange differences on subsidiaries
from consolidation including net investemnt hedge
in foreign operations
Increase
of exchange rate
Total
influence
Decrease
of exchange rate
Total
influence
EUR/PLN
+15%
23,706
–15%
(23,706)
USD/PLN
+15%
(962,082)
–15%
962,082
CZK/PLN
+15%
(7,728)
–15%
7,728
LTL/PLN
+15%
22,485
–15%
(22,485)
(923,619)
923,619
Total
Increase
of exchange rate
Total
influence
Decrease
of exchange rate
Total
influence
EUR/PLN
+15%
(515,596)
–15%
515,596
USD/PLN
+15%
(1,105,259)
–15%
1,105,259
CZK/PLN
+15%
(7,728)
–15%
7,728
JPY/PLN
+15%
(860)
–15%
860
LTL/PLN
+15%
22,485
–15%
(1,606,958)
(22,485)
1,606,958
The influence of changes in significant foreign currencies in relation to presentation currency (PLN) on equity relating to foreign exchange
differences on subsidiaries from consolidation as at 31 December 2012.
Sensivity of a net investment in a foreign operations including hedging reserve
Increase
of exchange rate
Total
influence
Decrease
of exchange rate
Total
influence
EUR/PLN
+15%
93,248
–15%
(93,248)
USD/PLN
+15%
174,866
–15%
(174,866)
CZK/PLN
+15%
718,808
–15%
(718,808)
986,922
(986,922)
The above analysis concerns sensitivity of total net assets of foreign entities (including sensitivity of financial instruments of foreign entities
on foreign exchange differences on subsidiaries from consolidation) as at 31 December 2012.
Total influence of changes in exchange rates of significant currencies in relation to functional currency (PLN) on equity including foreign
exchange differences on translation of a net investment in foreign operation as at 31 December 2012.
Total influence on profit or loss and other comprehensive income
EUR/PLN
Increase
of exchange rate
Total
influence
Decrease
of exchange rate
Total
influence
+15%
(446,054)
–15%
446,054
USD/PLN
+15%
31,689
–15%
(31,689)
CZK/PLN
+15%
718,808
–15%
(718,808)
JPY/PLN
+15%
(860)
–15%
860
303,583
(303,583)
205
Currency structure of financial instruments as at 31 December 2011
EUR
USD
CZK
LTL
JPY
Other
currencies
after
translation
to PLN
1,420
—
—
6,977
—
—
15,197
370,962
191,498
6,433,206
173,136
—
14,799
3,629,885
790
33
79,209
—
—
—
17,156
1,629
62,276
297,330
—
—
—
270,891
48,627
78,724
2,260,585
46,081
4,846
13,958
943,712
624
11,986
376,411
—
—
—
108,120
424,052
344,517
9,446,741
226,194
4,846
28,757
4,984,961
—
—
2,336,579
—
—
—
399,790
952,092
2,066,207
1,942,271
809
—
—
11,599,612
by class
Total after
translation
to PLN
Financial assets
Deposits
Trade receivables
Loans granted
Other
Debt securities
Loans
Borrowings
—
—
—
—
—
—
—
Finance lease
—
—
14,169
-
—
—
2,424
350,301
2,064,999
3,744,484
118,272
29,473
3,247
9,400,660
48
8,517
430,010,
—
—
—
102,893
79,476
33,644
247,497
13,742
35,750
—
527,507
6,733
9,794
419,328
—
—
—
134,953
1,388,650
4,183,161
9,134,338
132,823
65,223
3,247
22,167,839
Trade liabilities
Other
Sensitivity analysis for currency risk
The influence of potential changes in carrying amounts of financial instruments (as at 31 December 2011) arising from hypothetical
changes in exchange rates of relevant currencies in relation to presentation currency (PLN) on profit before tax, hedging reserve and foreign
exchange differences on subsidiaries from consolidation:
Increase
of exchange rate
Total
influence
Decrease
of exchange rate
Total
influence
EUR/PLN
+15%
(667,162)
–15%
667,162
USD/PLN
+15%
(790,641)
–15%
790,641
JPY/PLN
+15%
(1,177)
–15%
(1,458,980)
1,177
1,458,980,
Increase
of exchange rate
Total
influence
Decrease
of exchange rate
Total
influence
EUR/PLN
+15%
(185,575)
–15%
185,575
USD/PLN
+15%
(41,749)
–15%
(227,324)
206
41,749
227,324
Influence of foreign operations on foreign exchange differences on subsidiaries from consolidation
including net investemnt hedge in foreign oper ations
Increase
of exchange rate
Total
influence
Decrease
of exchange rate
Total
influence
EUR/PLN
+15%
7,050
–15%
(7,050)
USD/PLN
+15%
(1,216,633)
–15%
1,216,633
CZK/PLN
+15%
(11,671)
–15%
11,671
LTL/PLN
+15%
29,638
–15%
(1,191,616)
(29,638)
1,191,616
Total
EUR/PLN
Increase
of exchange rate
Total
influence
Decrease
of exchange rate
Total
influence
+15%
(845,687)
–15%
845,687
USD/PLN
+15%
(2,049,023)
–15%
2,049,023
CZK/PLN
+15%
(11,671)
–15%
11,671
JPY/PLN
+15%
(1,177)
–15%
1,177
LTL/PLN
+15%
29,638
–15%
(2,877,920)
(29,638)
2,877,920
The influence of changes in relevant currencies in relation to presentation currency (PLN) on equity relating to foreign exchange differences
on subsidiaries from consolidation as at 31 December 2011
Sensivity of a net investment in a foreign operations including hedging reserve
Increase
of exchange rate
Total
influence
Decrease
of exchange rate
Total
influence
EUR/PLN
+15%
101,618
–15%
(101,618)
USD/PLN
+15%
14,416
–15%
(14,416)
CZK/PLN
+15%
863,379
–15%
(863,379)
979,413
(979,413)
The above analysis concerns sensitivity of total net assets of foreign entities (including sensitivity of financial instruments of foreign entities
on foreign exchange differences on subsidiaries from consolidation) as at 31 December 2011.
Total influence of changes in exchange rates of significant currencies in relation to presentation currency (PLN) on equity including foreign
exchange differences on translation of a net investment in a foreign operation as at 31 December 2011
EUR/PLN
Increase
of exchange rate
Total
influence
Decrease
of exchange rate
Total
influence
+15%
(751,119)
–15%
751,119
USD/PLN
+15%
(817,972)
–15%
817,972
CZK/PLN
+15%
863,379
–15%
(863,379)
JPY/PLN
+15%
(1,177)
–15%
1,177
(706,889)
706,889
Variations of currency rates described above were calculated based on historical volatility of particular currency rates and analysts’ forecasts.
Sensitivity of financial instruments for currency risk was calculated as a difference between the initial carrying amount of financial instruments (excluding derivative instruments) and their potential carrying amount calculated using assumed increases/decreases in currency
rates. In case of derivative instruments the influence of currency rate variations on fair value was examined at constant level of interest
rates. Fair value of currency forwards and foreign exchange swaps is calculated based on discounted future cash flows of closed transactions calculated based on difference between forward price and transaction price.
207
35.7.3.2.Interest rate risk
The Group is exposed to risk of volatility of cash flows due to interest rates resulting from borrowings, bank loans and debt securities
based on floating interest rates as well as derivative transactions hedging risk of cash flows.
Structure of financial instruments subject to interest rate risk
as at 31/12/2012
Deposits
Loans granted
Note
EURIBOR
LIBOR
PRIBOR
VILIBOR
WIBOR
Total
18
—
22,262
—
—
—
22,262
14,18
3,049
34
9,664
—
271,949
284,696
14
Debt securities
—
—
—
—
2,029
2,029
3,049
22,296
9,664
—
273,978
308,987
22.3.
—
—
—
—
1,022,716
1,022,716
Loans
22.1.
2,290,274
3,867,718
273,716
2,071
1,161,073
7,594,852
Borrowings
22.2.
—
—
—
—
1,558
1,558
24,27
40,353
21,056
—
—
17,600
79,009
2,330,627
3,888,774
273,716
2,071
2,202,947
8,698,135
EURIBOR
LIBOR
PRIBOR
VILIBOR
WIBOR
RAZEM
6,272
—
—
8,925
—
15,197
as at 31/12/2011
Klasy instrumentów finansowych
Deposits
18
Loans granted
14,18
3,489
113
13,554
—
—
17,156
9,761
113
13,554
8,925
—
32,353
Debt securities
22.3.
—
—
—
—
763,428
763,428
Loans
22.1.
4,205,198
7,061,057
332,323
1,033
224,707
11,824,318
Borrowings
22.2.
—
—
—
—
10,055
10,055
24,27
64,745
48,857
—
—
1,507
115,109
4,269,943
7,109,914
332,323
1,033
999,697
12,712,910
Sensitivity analysis for interest rate risk
The influence of hypothetical financial instruments change of carrying amounts of on profit before tax and hedging reserve due to hypothetical changes in significant interest rates
Assumed variation
Interest
rate
as at
31/12/2012
as at
31/12/2011
Influence
on profit before tax
2012
Influence
on hedging reserve
2011
2012
2011
Total
2012
2011
WIBOR
+50
+50
(9,567)
(4,991)
(1,787)
930
(11,354)
(4,061)
LIBOR
+50
+50
(19,227)
(35,305)
6,823
17,981
(12,404)
(17,324)
EURIBOR
+50
+50
(11,436)
(20,977)
33,145
15,932
21,709
(5,045)
PRIBOR
+50
+50
WIBOR
EURIBOR
PRIBOR
(1,320)
(1,594)
—
—
(1,320)
(1,594)
(41,550)
(62,867)
38,181
34,843
(3,369)
(28,024)
–50
–50
9,567
4,991
1,817
(932)
11,384
4,059
—
–50
—
20,977
—
(16,271)
—
4,706
–50
–50
1,320
1,594
—
—
1,320
1,594
10,887
27,562
1,817
(17,203)
12,704
10,359
The above interest rates variations were calculated based on observations of interest rates fluctuations in the current and prior annual
reporting period as well as on the basis of available forecasts.
Low interest rates of EURIBOR and LIBOR at the end of 2012 and market forecasts caused that the Group did not take the potential
decrease in the sensitivity analysis of EURIBOR and LIBOR into consideration.
As at the end of 2011 the Group did not take the potential decrease of LIBOR into consideration, due to the low level of interest rates
and market forecasts.
208
The Group does not consider sensitivity analysis for VILIBOR due to insignificant impact on the Group’s financial statements.
The sensitivity analysis was performed on the basis of instruments held as at 31 December 2012 and as at 31 December 2011. The influence of interest rates changes was presented on annual basis.
The sensitivity of financial instruments for interest rate risk was calculated as arithmetic product of the balance of items, sensitive to interest rates (excluding derivatives) multiplied by adequate variation of interest rate.
For derivatives in sensitivity analysis for interest rate risk, the Group uses interest rate curve displacement due to potential reference rate
change, provided that other risk factors remain constant.
35.7.3.3.Risk of changes in raw materials and petroleum product prices
The operating activity of the Company includes the following risks:
• price change of crude oil processed;
• the obligation to maintain reserves of crude oil and fuels;
• Ural/Brent differential fluctuations (difference between quotations of these crude oil types);
• price changes of refining and petrochemical products, which depend on the quotations of crude oil and products on international
markets.
As at 31 December 2012 there were financial instruments hedging the risk of changes in prices of raw materials and petroleum products
resulting from cash flow hedging in connection with the sale/purchase of crude oil, gasoline and diesel and product margins.
Unit
of measure
as at
31/12/2012
as at
31/12/2011
Crude oil
BBL
9,681,914
7,294,035
Diesel oil
MT
121,279
85,190
Gasoline
MT
384,128
12,737
Bitumen
MT
14,815
11,140
Heating oil
MT
2,404
—
JET A-1
MT
—
253
Hedged raw material/finished good
Sensitivity analysis of instruments hedging risk of changes in crude oil, diesel oil, gasoline, bitumen, heating oil
and JET A-1 fuel prices
Analysis of the influance of potential changes in the book values of financial instruments (as at 31 December 2012) on profit before tax
and hedging reserve in relation to a hypothetical change in prices of petroleum products and raw materials:
Increase of
prices
Total
influence
Decrease
of prices
Total
influence
Crude oil USD/BBL
22%
(61,730)
-22%
61,730
Diesel oil USD/MT
19%
(62,237)
-19%
62,237
Gasoline USD/MT
21%
(202,998)
-21%
202,998
Bitumen EUR/MT
22%
4,371
-22%
(4,371)
Heating oil USD/MT
22%
(2,809)
-22%
2,809
(325,403)
325,403
Increase of
prices
Total
influence
Decrease
of prices
Total
influence
Crude oil USD/BBL
+22%
546,683
-22%
(546,683)
Diesel oil USD/MT
+19%
(5,596)
-19%
5,596
541,087
(541,087)
Increase of
prices
Total
influence
Decrease
of prices
Total
influence
Crude oil USD/BBL
22%
484,953
-22%
(484,953)
Diesel oil USD/MT
19%
(67,833)
-19%
67,833
Gasoline USD/MT
21%
(202,998)
-21%
202,998
Bitumen EUR/MT
22%
4,371
-22%
(4,371)
Heating oil USD/MT
22%
(2,809)
-22%
2,809
215,684
(215,684)
209
Analysis of the influance of potential changes in the book values of financial instruments (as at 31 December 2011) on profit before tax
and hedging reserve in relation to a hypothetical change in prices of petroleum products and raw materials:
Increase of
prices
Total
influence
Decrease
of prices
Total
influence
Crude oil USD/BBL
+27,5%
(191,818)
-27,5%
191,818
Diesel oil USD/MT
+23%
(10,430)
-23%
10,430
Bitumen EUR/MT
+25%
5,699
-25%
(5,699)
JET A-1 USD/MT
+22%
186
-22%
(186)
(196,363)
196,363
Increase of
prices
Total
influence
Decrease
of prices
Total
influence
Crude oil USD/BBL
+27,5%
540,009
-27,5%
(540,009)
Diesel oil USD/MT
+23%
36,529
-23%
(36,529)
Gasoline USD/MT
+28%
11,221
-28%
(11,221)
587,759
(587,759)
Increase of
prices
Total
influence
Decrease
of prices
Total
influence
Crude oil USD/BBL
+27,5%
348,191
-27,5%
(348,191)
Diesel oil USD/MT
+23%
26,099
-23%
(26,099)
Gasoline USD/MT
+28%
11,221
-28%
(11,221)
Bitumen EUR/MT
+25%
5,699
-25%
(5,699)
JET A-1 USD/MT
+22%
186
-22%
(186)
391,396
(391,396)
The above variations of crude oil, diesel oil and gasoline prices were calculated based on historical volatility for 2012 and for 2011 and
available analysts’ forecasts.
The sensitivity analysis was performed on the basis of instruments held as at 31 December 2012 and as at 31 December 2011, the influence of changes of prices was presented on annual basis. Fair value of commodity swaps is calculated based on discounted future cash
flows of executed transactions, calculated as a difference between term and transaction price.
In case of derivatives, the influence of crude oil, diesel oil and gasoline prices variations on fair value were examined at constant level
of currency rates.
The carrying amount of hedging instruments for crude oil, diesel oil and gasoline deliveries as at 31 December 2012 and as at 31 December
2011 amounted to PLN (57,784) and PLN 207,239 thousand, respectively.
35.7.3.4.Risk of changes in CO2 emission rights prices
The Capital Group entities were granted CO2 emission rights on the basis of the binding legal regulations resulting from the Kyoto
Protocol to the United Nations Framework Convention on Climate Change, adopted by the European Union, followed by the decision
of the Council of Ministers.
The Group performs verification of the number of rights annually and defines methods of systematic balancing of identified shortages/
surpluses either in the way of intercompany transactions or through market term and spot transactions depending on the situation. In
2012, the Group concluded hedging transactions for the rights purchase price, which in the future will be amortised as a settlement
of CO2 emissions. Valuations of these transactions are not subject to recognition in the consolidated financial statements, as the rights
were purchased for own use. As at 31 December 2011 financial liabilities due to negative valuation of CO2 emission rights forwards
amounted to PLN 222,449 thousand. In 2012 forward contract were settled.
Additional information regarding CO2 emission rights is disclosed in note 9.3.1.
210
36.Leases
36.1.Capital Group as a lessee
Opearting lease
As at 31 December 2012 and as at 31 December 2011 the Capital Group possessed non-cancellable operating lease agreements as a lessee.
Operating lease agreements (tenancy, rent) regard mainly the lease of tanks, petrol stations, means of transportation and computer equipment. Agreements include clauses concerning contingent rent payables and in most cases they can be prolonged.
The total lease payments, resulting from non-cancellable operating lease agreements recognised as expenses in 2012 and in 2011 amounted
to PLN (119,077) thousand and PLN (124,507) thousand, respectively.
Future minimum lease payments under non-cancellable operating lease agreements as at 31 December 2012 and as at 31 December 2011
as at
31/12/2012
Up to 1 year
as at
31/12/2011
77,407
91,473
From 1 to 5 years
267,150
330,403
Above 5 years
652,330
634,778
996,887
1,056,654
Additional information regarding perpetual usufruct of land under operating leases are presented in note 10.
Finance lease
The Capital Group as at 31 December 2012 and as at 31 December 2011 possessed the finance lease agreements as a lessee.
In concluded lease agreements, the general conditions of finance lease are effective, there are neither particular restrictions nor additional terms of contract. The finance lease contracts do not contain any clauses concerning contingent liabilities from lease fees and give
the possibility to purchase the leased equipment.
Future minimum lease payments under finance lease agreements as at 31 December 2012 and as at 31 December 2011
as at
31/12/2012
as at
31/12/2011
Up to 1 year
31,040
28,820
From 1 to 5 years
61,889
57,684
Above 5 years
25,816
20,603
118,745
107,107
Present value of future minimum lease payments under finance lease agreements as at 31 December 2012 and as at 31 December 2011
as at
31/12/2012
as at
31/12/2011
Up to 1 year
27,075
27,140
From 1 to 5 years
53,995
54,539
20,835
16,236
101,905
97,915
Note
Above 5 years
24,25
The difference between total value of future minimum lease payments and their present value results from discounting of lease payments
by the interest rate implicit in the agreement.
As at 31 December 2012 and as at 31 December 2011 the net carrying amount of each class of assets in finance lease
Property, plant and equipment
as at
31/12/2012
as at
31/12/2011
153,944
169,327
27,470
20,873
47,441
55,141
Vehicles
77,382
91,818
1,651
1,495
Other
Disclosures required by IFRS 7 relating to finance lease are captured in note 35 and are presented jointly with other financial instruments.
211
36.2.Capital Group as lessor
Operating lease
As at 31 December 2012 and as at 31 December 2011 the Capital Group did posses non-cancellable operating lease agreements as a lessor.
The total value of lease payments under non-cancellable operating lease agreements recognized as revenues of the period in 2012 and
in 2011 amounted to PLN 6,074 thousand and PLN 5,741 thousand, respectively.
Future minimum lease payments under non-cancellable operating lease agreements as at 31 December 2012 and as at 31 December 2011
Up to 1 year
as at
31/12/2012
as at
31/12/2011
6,074
5,741
Financial lease
As at 31 December 2012 and as at 31 December 2011 the Capital Group did not posses financial lease agreements as a lessor.
37. Investment expenditures incurred and future commitments resulting from signed investment
contracts
Total amount of investment expenditures together with borrowing costs incurred in 2012 and in 2011 amounted to PLN 2,033,814 thousand and PLN 2,133,454 thousand, respectively, including PLN 113,742 thousand and PLN 102,565 thousand of environmental protection
related investments and expenditures related to exploration and extraction of hydrocarbons/sat amounted to PLN 98,576 thousand and
PLN 63,649 thousand, respectively.
As at 31 December 2012 and as at 31 December 2011 the value of future liabilities resulting from contracts signed until this date amounted
to PLN 1,961,006 thousand and PLN 449,293 thousand.
38. Contingent liabilities
as at
31.12.2011
Increase/
(Decrease)
as at
31.12.2012
Antitrust proceedings of the OCCP
14,000
(14,000)
—
Legal cases
16,845
(12,807)
4,038
30,845
(26,807)
4,038
Anit-trust proceedings of the OCCP are described in note 44.1.2.2.
Court proceedings as at 31 December 2012 and as at 31 December 2011 relate mainly to claims arising from trade contracts with contractors and employees.
The Company from the ANWIL Group – Spolana a.s. recognized the provision for the reclamation of land where ash landfill is located.
Spolana a.s. was covered by guarantees from the Ministry of Environment of approximately PLN 1,330,000 thousand translated at the rate
as at 31 December 2012 (representing approximately CZK 8,159,000 thousand) to cover the costs associated with the removal of contamination from the years before the privatization of the company (till 1992).The guarantees regard environmental projects in Spolana, defined
in scope and amount. Expenditures related to the reclamation of land owned by Spolana a.s. incurred by the Government of the Czech
Republic, which were covered by the above mentioned guarantees, amounted till 31 December 2012 PLN 789,000 thousand translated
at the rate as at 31 December 2012 (representing approximately CZK 4,839,000 thousand).
In addition, Spolana is covered by a guarantee issued by the company Unipetrol a.s. for ANWIL S.A. securing the costs associated with
the contamination removal, in case the cost amount of one of the projects guaranteed by the Ministry, exceeds the amount of the guarantee issued by the government for its realization, however, only up to the equivalent of 40% of the Spolana a.s. shares acquisition price
(about PLN 50,000 thousand).
In addition to the above, Spolana a.s. currently produces chlorine using the mercury electrolysis. According to the owned integrated
pollution prevention and control (IPCC) license that is in force until 2014, when production ceases, the company is required to present
a reclamation program after it stops to use its fixed assets. As at 28 February 2013 Spolana’s request for the extension of the IPPC was
dismissed by the local authorities. Currently, the Board of Directors of Spolana takes administrative steps to appeal. In the same time,
alternative means of PVC production using other technologies are considered. This will require an adaptation of the electrolysis building
to its new function – PVC packed finished goods warehouse. At this point, no physical liquidation of the building and thus no potential
costs of reclamation are expected. In 2012 Spolana recognized a provision of PLN 4,972 thousand for the expected adoptation costs
of the electrolysis building to its new function. These costs have been estimated by an independent expert.
39. Guarantees and sureties
Excise tax guarantees and excise tax on goods and merchandise under the excise tax suspension procedure as at 31 December 2012 and
as at 31 December 2011 amounted to PLN 1,729,558 thousand and PLN 1,550,080 thousand, respectively.
Information regarding guarantees and sureties is disclosed in note 35.7.1.
212
40. Related party transactions
40.1.Information on material transactions concluded by the companies or subsidiaries with related parties
on other than market terms
In 2012 and in 2011 there were no material related party transactions in the Group concluded on other than market terms.
40.2.Transactions with members of the Management Board, Supervisory Board of the Parent Company, their spouses, siblings, ascendants, descendants and their other relatives
In 2012 and in 2011 the Group companies did not grant to managing and supervising persons and their relatives any advances, borrowings,loans,
guarantees and commitments, or other agreements obliging to render services to the Parent Company and its related parties.
As at 31 December 2012 and as at 31 December 2011 there were no loans granted by the Group companies to neither the managing
and supervising persons nor their relatives.
In 2012 and in 2011 there were no material transactions with members of the Management Board and the Supervisory Board of the Parent
Company, or their spouses, siblings, ascendants, descendants or other relatives.
40.3.Transactions with related parties concluded by the key management personnel of the Parent Company
and the Group companies
In 2012 and in 2011 members of the key executive personnel of the Parent Company and the Capital Group companies based on the submitted statements on transactions concluded with related parties disclosed the following transactions:
Type of relation through
key executive personnel
of the Company and
the Group companies
Sales
Purchases
for the year ended
31/12/2012
for the year ended
31/12/2011
for the year ended
31/12/2012
for the year ended
31/12/2011
Supervising persons
402
30
—
—
Managing persons
361
48
7
13
Other key executive personnel
289
94
38
—
1,052
172
45
13
As at 31 December 2012 and as at 31 December 2011, the key management personnel of the Parent Company and the Group companies
did not present in the submitted statements any balances regarding receivables or liabilities with related parties.
40.4.Transactions and balances of settlements of the Capital Group companies with related parties
Jointly-controlled
entities
Associates
Total
1,905,300
68,455
1,973,755
606,590
43,719
650,309
12,416
143
12,559
11,876
—
11,876
62
1
63
Jointly-controlled
entities
Associates
Total
403,803
11,218
415,021
251,411
8,122
259,533
Jointly-controlled
entities
Associates
Total
1,857,217
133,983
1,991,200
539,943
124,886
664,829
61,826
2,757,105
2,818,931
60,057
250,013
310,070
32
61
93
Sales
Purchases
Financial revenues,including:
Dividends
Financial expenses
Sales
Purchases
Financial revenues,including:
Dividends
Financial expenses
213
Jointly-controlled
entities
Associates
Total
345,136
17,557
362,693
243,599
8,108
251,707
The above transactions with related parties include mainly sale and purchase of petrochemicals and refinery products and sale and purchase
of repair, transportation and other services. Related party sale and purchase transactions were concluded on market terms.
Guarantees and sureties granted in the Group on behalf of related parties as at 31 December 2012 and as at 31 December 2011 amounted
to PLN 2,346,022 thousand and PLN 2,177,823 thousand, respectively. They related timely payment of liabilities by related parties.
41. Remuneration together with profit-sharing paid and due or potentially due to Management
Board, Supervisory Board and other members of key executive personnel of Parent Company
and the Capital Group companies in accordance with IAS 24
The Management Board’s, the Supervisory Board’s and other key executive personnel’s remuneration includes short-term employee benefits,
post-employment benefits, other long-term employee benefits and termination benefits paid, due and potentially due during the period.
for the year ended
31/12/2012
for the year ended
31/12/2011
11,502
11,952
– remuneration and other benefits
6,454
6,498
– bonus paid for previous year
4,186
5,454
862
—
5,718
5,460
570
1,140
182,439
179,015
31,023
32,762
151,416
146,253
1,222
1,322
Remuneration of the Management Board Members of the Company
– premuneration paid to the Management Board Members performing the function
in the previous years1)
Bonus potentially due to the Management Board Members,
to be paid in next year 2)
Remuneration due to Management Board Member, to be paid in the next year3)
Remuneration and other benefits of the key executive personnel
– other key executive personnel of the Company
– key executive personnel of the subsidiaries belongigng to the Capital Group
Remuneration of the Supervisory Board Members
1)
2)
3)
paid remuneration due to non-competition clause and paid bonuses for prior year.
bonus estimated assuming full realization of the Management Board Members goals.
remuneration due to severance pay for the year ended 31 December 2012 and remuneration due to severance pay and non-competition clause
for the year ended 31 December 2011.
41.1.Bonus system for key executive personnel of the ORLEN Capital Group
In 2012 the key executive personnel was participating in the annual MBO bonus system (management by objectives). The regulations
applicable to PKN ORLEN Management Board, directors directly reporting to Management Boards of PKN ORLEN entities and other key
positions have certain common features. The persons subject to the above mentioned systems are remunerated for the accomplishment of specific goals set at the beginning of the bonus period, by the Supervisory Board for the Management Board Members and
by the Management Board members for the key executive personnel. The bonus systems are structured in such way, so as to promote
the cooperation between individual employees in view to achieve the best possible results for the Group. The goals so-said are qualitative
or quantitative (measurable) and are accounted for following the end of the year for which they were set, on the rules adopted in the applicable Bonus System Regulations.
Regulation gives the possibility to promote employees, who significantly contribute to results generated by the Company.
Since January 2012 there has been an amendment to the Bonus Regulations to Directors that are directly subordinated to the Management
Board of PKN ORLEN. The purpose of the amendment was to further increase the flexibility and incentive nature of the system.
41.2.Remuneration regarding non-competition clause and dissolution of the contract because of dismissal
from the position held
According to agreements, Members of the PKN ORLEN Management Board are obliged to obey a non-competition clause for 6 or 12
months, starting from the date of termination or expiration of the contract. In the period, Members of the Management Board are entitled
to receive remuneration in the amount of six or twelve basic monthly remuneration, payable in equal monthly installments. In addition,
agreements include remuneration payments in case of dissolution of the contract because of dismissal from the position held. Remuneration
in such a case is six or twelve basic monthly remuneration. As far as other companies of the Capital Group are concerned, Management
Board members are typically obliged to obey a non-competition clause for 6 months, starting from the date of termination or expiration
of the contract. In the period, Members of the Management Board receive remuneration in the amount of 50% of six months base salary
remuneration, payable in 6 equal monthly installments. Furthermore, severance pay for dismissal from the position held amounts to three
or six times basic monthly remuneration.
214
42. Remuneration arising from the agreement with the entity authorized to conduct audit of the financial statements
In the period covered by this consolidated financial statement the entity authorized to conduct audit of the Group’s financial statements
is KPMG Audyt Sp. z o.o. According to the agreement concluded on 30 May 2005 with subsequent amendments KPMG Audyt Sp. z o.o.
executes the interim reviews and audits of separate and consolidated financial statements for periods 2005-2012.
for the year ended
31/12/2012
for the year ended
31/12/2011
1,668
1,645
Audit of the annual financial statements: PKN ORLEN and ORLEN Group
620
647
Reviews of financial statements
558
572
Related services, including:
490
425
15
80
Remuneration of KPMG Audyt Sp. z o.o. in respect of the Parent Company
tax advisory services
Remuneration of KPMG in respect of subsidiaries belonging to the Capital Group
4,153
4,714
Audit of the annual financial statements
2,436
2,585
Reviews of financial statements
1,559
1,750
Related services
158
379
5,821
6,359
for the year ended
31/12/2012
for the year ended
31/12/2011
12,485
12,733
43. Employment structure
43.1. Average employment in persons
Blue collar workers
White collar workers
9,630
9,728
22,115
22,461
as at
31/12/2012
as at
31/12/2011
12,299
12,618
43.2. Employment in persons
Blue collar workers
White collar workers
9,657
9,762
21,956
22,380
Average employment is calculated based on number of active employees. Employment in persons includes all employees.
Due to restructuring activities held in ORLEN Lietuva Group, Unipetrol Group and Trzebinia Group, the employment in ORLEN Group
decreased by 586 persons. Development activities including development of refining segment (ORLEN Upstream), entry into new markets
(foundation of ORLEN Apsauga UAB) and the acquisition of new contracts (ORLEN Transport, ORLEN Wir) resulted in an employment
increase of 162 persons.
44. Information concerning significant proceedings in front of court, body appropriate for arbitration proceedings or in front of public administration bodies
As at 31 December 2012 ORLEN Capital Group entities were parties in the following significant proceedings in front of court, body appropriate for arbitration proceedings or in front of public administration bodies:
44.1.Proceedings in which the ORLEN Capital Group entities act as a defendant
44.1.1. Proceedings with the total value exceeding 10% of the Issuer’s equity
44.1.1.1.Risk connected with the disposal of assets and liabilities related to purchase of Unipetrol shares
On 21 October 2010 the Court of Arbitration in Prague overruled the entire claim of Agrofert Holding a.s. against PKN ORLEN regarding
the payment of PLN 3,172,709 thousand translated using exchange rate as at 31 December 2012 (representing CZK 19,464,473 thousand)
with interest and obliged Agrofert Holding a.s. to cover the cost of proceedings born by PKN ORLEN. The claim regarded the payment
of a compensation for losses related among others to unfair competition and illegal violation of reputation of Agrofert Holding a.s.
The Court of Arbitration ruling dated 21 October 2010 ended the last of four arbitration proceedings initiated by Agrofert Holding a.s.
related to purchase of UNIPETROL a.s. shares by PKN ORLEN.
215
On 3 October 2011 PKN ORLEN received from the court in Prague (Czech Republic) claim which overruled the sentence of arbitration
court of the above mentioned case.
On 16 January 2012 PKN ORLEN submitted a response to Agrofert’s claim. In its response PKN ORLEN appealed to dismiss all Agrofert
Holding’s claim and adjudge it with proceeding costs refund.
On 10 January 2013 there was the hearing in front of the court in Prague. During the hearing the rules of the proceeding have been
arranged. The District Court in Prague set the next hearing for 23-25 April 2013.
In the opinion of PKN ORLEN the decision included in judgment of the arbitration court dated 21 October 2010 is correct and there is no
ground for its reverse.
44.1.2. Other significant proceedings with the total value not exceeding 10% of the Issuer’s equity
44.1.2.1.Tax proceedings
As at 31 December 2012 there are ongoing tax proceedings on Rafineria Trzebinia S.A. concerning excise tax settlements for the period
May-September 2004.
As a result of the Customs Office proceeding, the excise tax liability for the period May – September 2004 was set at the amount of approximately PLN 100,000 thousand. The Management Board of Rafineria Trzebinia filed an appeal against the discussed decisions. In December
2005 the Director of the Customs Chamber in Cracow (Director of the CC) kept the first instance authority’s decisions in force. Rafineria
Trzebinia appealed against above listed decisions. According to the sentence dated 12 November 2008 the Voivodship Administrative
Court (VAC) inclined to the appeal of Rafineria Trzebinia and overruled the decision of Director of the CC.
May – August 2004
On 25 September 2009 the Head of the Customs Office in Cracow (first instance authority) issued decisions for the period May – August
2004 increasing the tax liability of approximately PLN 80,000 thousand. On 14 October 2009 Rafineria Trzebinia S.A. appealed to the Director
of the Customs Chamber in Cracow regarding the above mentioned decision. On 22 January 2010 the Director of the Customs Chamber
in Cracow dismissed entirely the first instance authority’s decisions and decided to revoke them to reexamination.
On 23 March 2011 the Head of the Customs Office suspended proceedings. Rafineria Trzebnia appealed against decisions of the Director
of the Customs Chamber to the VAC. On 20 April 2011 the VAC overruled the complaint and the decision of the Head of the Customs
Office as a whole and revoke the proceedings to another reexamination.
On 29 June 2011 company filed an annulment claim to the Supreme Administrative Court (SAC) of the VAC’s sentence. As at 20 March 2013
SAC overruled the annulment claim.
At the date of publication of the foregoing consolidated financial statements proceedings before the Head of the Customs Office are suspended.
September 2004
On 16 January 2009 the Director of the Customs Chamber in Cracow filed an annulment to the Supreme Administrative Court (SAC)
in Warsaw in regards of excise tax liability for September 2004. The annulment was overruled by SAC on 25 August 2009. The proceeding returned to the Customs Chamber stage.
On 24 November 2010 Head of the Customs Office in Cracow reissued a decision determining the amount of excise tax liability for
September 2004 of PLN 37,612 thousand. On 15 December 2010 Rafineria Trzebinia S.A. raised a complaint to the Director of the Customs
Chamber in Cracow regarding the above mentioned decision.
On 9 May 2011 the Director of the Customs Chamber in Cracow issued a decision regarding the excise tax liability for September 2004
keeping the first instance authority’s decisions in force. On 19 May 2011 Rafineria Trzebinia S.A. appealed against the above mentioned
decision to the VAC in Cracow and filed a supplement to the appeal on 13 June 2011.
On 25 January 2012 the VAC in Cracow overruled the appeal of Rafineria Trzebinia S.A. and issued a sentence sustaining the decision
of the Head of the Customs Office in Cracow regarding the excise tax liability for September 2004. On 27 February 2012 Rafineria Trzebinia S.A.
received a legal justification of the verdict and on 28 March 2012 filed an annulment of the sentence regarding the above mentioned decision.
The District Court V Department of Land and Mortgage Register, at the request of the Head of the Customs Office, performed compulsory bail mortgage entries of the total amount of PLN 111,334 thousand on Rafineria Trzebinia real estate by way of securing the claim
resulting from the decision from September 2004.
An annulment claim has not been examined yet.
Rafineria Trzebinia S.A. created a provision recognized as cost of 2011 to cover the potential negative financial impact regarding the reali
zation of excise tax liabilities.
44.1.2.2.Anti-trust proceedings
• Anti-trust proceeding was held due to suspition that in the years 1996 – 2007, PKN ORLEN, Petrol Station Kogut Sp.j. and MAGPOL
B. Kułakowski i Wspólnicy Sp.j. were using practice limiting competition on the domestic market of wholesale of petrol and diesel oil
by setting retail selling prices of petrol and diesel oil. On 16 July 2010 the President of the OCCP issued a decision, in which PKN ORLEN
and Petrol Station Kogut Sp.j. were found guilty of participating till 16 July 2007 in anti-competition actions. The President of OCCP has
imposed a fine on PKN ORLEN of PLN 52,700 thousand. On 2 August 2010 PKN ORLEN appealed from the decision of the President
of the OCCP to the Court of Competition and Consumer Protection.In the decision dated 25 September 2012 the Court included
partially the Company’s appeal from the decision imposing a fine and decreased the amount of the fine to PLN 26,368 thousand. PKN
ORLEN appealed from the sentence, demanding to revoke the decision in the matter of taking part in anti-competition actions, possibly
by reducing the fine. The case is being considered by the Warsaw Court of Appeal.
216
• The President of the OCCP conducted anti-trust proceeding against Orlen Oil sp. z o.o. in relation to a potential violation of Competition and
Consumer Protection Act by concluding an agreement for setting the resale pricing of Platinum product line with authorized distributors.
On 31 December 2012 the President of the OCCP issued a decision, delivered to the Orlen Oil Sp. z o.o. representative on 10 January 2013
imposing a fine of PLN 1,994 thousand. On 24 January 2013 Orlen Oil Sp. z o.o. appealed from this decision to the Court of Competition
and Consumer Protection. Orlen Oil Sp. z o.o. recognized a provision as cost of 2012 to cover the potential negative financial impact
regarding the ongoing proceedings.
44.1.2.3.Power transfer fee in settlements with ENERGA – OPERATOR S.A. (legal successor of Zakład Energetyczny
Płock S.A.)
As at the date of preparation of these consolidated financial statements PKN ORLEN participates in two court proceedings concerning
the settlement of system fee with ENERGA OPERATOR S.A. The subject of the court proceedings is regulated by the Regulation of the Minister
of Economy dated 14 December 2000 relating to detailed methods of determination and computation of tariffs and electricity settlement
regulations. According to the § 36 of the above regulation, the method of settlement of system fee, constituting an element of a power
transfer fee, was changed. According to the § 37 of the above regulation, a different method of system fee calculation was introduced.
Court proceedings in which PKN ORLEN acts as a defendant
The subject of the court proceedings concerns settlement of the contentious system fee for the period from 5 July 2001 to 30 June 2002.
The obligation to settle power transfer fee results from the electricity sale agreement between ENERGA – OPERATOR S.A. and PKN ORLEN
which was signed without determining contentious issues concerning system fee. The case was regarded as a civil case so contentious
system fee should be judged by an appropriate court.
In 2003 ENERGA – OPERATOR S.A. called on PKN ORLEN to compromise agreement and then filed a law suit against PKN ORLEN. In 2004
the Court issued a decision obliging PKN ORLEN to pay a liability connected with the so-called system fee to ENERGA – OPERATOR S.A.
of PLN 46,232 thousand. In its objection to the precept PKN ORLEN filed for entire dismissal of the suit.
On 25 June 2008 the District Court pronounced its verdict and dismissed the suit of ENERGA – OPERATOR S.A. entirely as well as sentenced
the reimbursement of court proceeding costs of PLN 31 thousand in favor of PKN ORLEN. In September 2008 ENERGA – OPERATOR S.A.
appealed against the above sentence.
On 10 September 2009 after the examination of ENERGA – OPERATOR S.A. appeal, the Court of Appeals in Warsaw announced a change
in the sentence of the District Court in Warsaw dated 25 June 2008. Payment of PLN 46,232 thousand increased by interest and refund
of proceedings’ costs was adjudged to the benefit of ENERGA – OPERATOR S.A. On 30 September 2009 PKN ORLEN made the payment.
On 4 February 2010 the Company submitted an annulment. The annulment was accepted for recognition by the Supreme Court. On 28
January 2011 the Supreme Court after conducting annulment proceeding overruled the previous verdict and decided to revoke the claim
to reexamination by the Court of Appeal. In March 2011 ENERGA – OPERATOR S.A. repaid part of the claimed amount of PLN 30,163
thousand. On 4 August 2011, the Court of Appeals in Warsaw revoked the first instance authority sentence and submitted the case
to reexamination by the District Court in Warsaw.
On 28 November 2011 Energa-Operator S.A. paid to PKN ORLEN the amount of PLN 45,716 thousand, as a partial return of the original
amount paid by PKN ORLEN S.A due to the sentence of Court of Appeals in Warsaw dated 10 September 2009.
The hearings were conducted on 30 April 2012 and 19 November 2012. The District Court decided that an expert has to give an opinion
regarding the case. Once the opinion is issued, the new hearing date will be announced.
Court proceedings in which PKN ORLEN acts as an outside intervener
In 2004 the District Court in Warsaw summoned PKN ORLEN as a co-defendant in a court case PSE – Operator S.A. (legal successor of PGE
Polska Grupa Energetyczna S.A., former Polskie Sieci Elektroenergetyczne) against ENERGA – OPERATOR S.A.
In March 2008 the District Court in Warsaw pronounced its verdict according to which ENERGA – OPERATOR S.A. is to pay PSE the amount
of PLN 62,514 thousand with interest and the amount of PLN 143 thousand as a refund of proceedings costs. ENERGA – OPERATOR S.A.
appealed against the above verdict. Based on the legal opinion of an independent expert PKN ORLEN did not appeal. In its sentence dated
19 March 2009 the Court of Appeals declined the appeal of ENERGA-OPERATOR S.A. against the verdict of the first instance Court that sentenced
the specified amount. The defendant submitted an annulment which on 5 February 2010 was accepted for recognition by the Supreme Court.
In its sentence dated 26 March 2010 the Supreme Court repealed the sentence and revoked it to reexamination by the Court of Appeals in Warsaw.
On 21 September 2011 the Court of Appeals pronounced its verdict, according to which claims of PSE – Operator S.A. were overruled,
the plantiff was requested to refund proceedings costs to the defendant and return PLN 122,000 thousand to ENERGA – OPERATOR S.A.
The Companies PSE Operator S.A. and ENERGA – OPERATOR S.A. submitted cassations to Supreme Court.
On 11 January 2013 the Supreme Court issued a sentence, in which revokes the appeal of ENERGA OPERATOR S.A., partially agrees
to the appeal of PSE Operator, revokes the previous sentence and passes the case back to the Appeal Court for reexamination, which
should include the statement of the cassation costs.
The Court ruling does not result in liabilities directly on the side of PKN ORLEN, as PKN ORLEN acts only as an outside intervener in the case,
but it may influence other court decisions in ENERGA OPERATOR S.A.’s claims against PKN ORLEN described above.
44.1.2.4. Compensation due to compulsory buy-out of non-controlling interest in PARAMO a.s.
The Company UNIPETROL a.s. is a party in a proceeding initiated in 2009 by former non-controlling shareholders of PARAMO a.s. and
concerns change in compensation received due to losses incurred on squeeze out performed by UNIPETROL a.s. in 2009. The claim concerns
the difference between officially approved price of PARAMO a.s. shares as at the date to buy – out amouting to CZK 977 per share, and
the requested by shareholders price ranging from CZK 1,800 to CZK 3,200 per share. The total amount of the claim is approximately no
more than PLN 49,552 thousand at average exchange rate as at 31 December 2012 (representing approximately CZK 304,000 thousand).
UNIPETROL a.s. considers the above described claims of former shareholders of PARAMO a.s. as ungrounded.
The Court confirmed, that PARAMO a.s. shareholders metting’s resolution regarding the share buyout is fully valid and effective. Two
plaintiffs appealed from the sentence to the Supreme Court in the Czech Republic. The claim will be considered only if the Supreme Court
recognizes an important law issue in the case.
44.1.2.5. I.P. – 95 s.ro. compensation claim against UNIPETROL RPA s.r.o.
On 23 May 2012, UNIPETROL RPA s.r.o. received from the Regional Court in Ostrava a claim brought by I.P.-95
s.r.o. for compensation in the total amount of approximately PLN 291,535 thousand, translated using the exchange rate from 31 December
2012 (representing CZK 1,788,559 thousand). The claim is related to the filing by UNIPETROL RPA s.r.o. motion for bankruptcy of I.P.-95
s.r.o. in November 2009. UNIPETROL RPA s.r.o. is one of the eight defendants against which the claim was brought.
According to the UNIPETROL RPA s.r.o the I.P.-95 s.r.o.’s claim is groundless. The case is being heard in the Regional Court in Ostrava.
The parties are waiting for the date of the first hearing.
217
44.2.
Court proceedings in which entities of the Capital Group act as plaintiff
44.2.1. Arbitration proceedings against Yukos International UK B.V.
On 15 July 2009 PKN ORLEN submitted in the Court of Arbitration by the International Chamber of Commerce in London the request
for arbitration proceedings against Yukos International UK B.V., seated in the Netherlands, in connection with purchase transaction of AB
ORLEN Lietuva (previously AB Mazeikiu Nafta) shares. Claims of PKN ORLEN concern inconsistency of Yukos International’s statements
with the actual state of AB ORLEN Lietuva at the closing date of the purchase of AB ORLEN Lietuva shares by PKN ORLEN. Demands
of PKN ORLEN concern reimbursement of the amount of approximately PLN 774,900 thousand at exchange rate as at 31 December 2012
(representing USD 250,000 thousand), deposited in the escrow account as a part of the payment for AB ORLEN Lietuva shares in order
to secure the potential claims of PKN ORLEN towards Yukos International.
On 14 September 2009 Yukos International submitted a response to PKN ORLEN’s request for arbitration proceedings. In its response
Yukos International appealed to dismiss all PKN ORLEN’s claims and adjudge it with proceeding costs refund.
On the first seating of the arbitration court in London, PKN ORLEN and Yukos International agreed i.a. proceedings schedule and extent
of competence of the Arbitration Court. On 3 May 2010, according to the schedule PKN ORLEN issued a law suit in which it demands from
Yukos International a reimbursement of approximately PLN 774,900 thousand at exchange rate as at 31 December 2012 (representing USD
250,000 thousand) with interest and costs of proceedings. On 31 December 2010 Yukos International submitted a response to the law suit,
in which PKN ORLEN’s claim was considered as unjustified and appealed for dismissal of all claims and for refund of proceeding costs. On 11
July 2011 PKN ORLEN pleaded the surrebutter in which replied to Yukos International arguments. Between 28 November and 8 December
2011 an evidentiary seating in front of the Court of Arbitration was held in London, during which representatives of PKN ORLEN and Yukos
International summed up the opinions of the parties, witnesses have been heared and experts have been appointed by the parties.
At the closing of the seating the Court of Arbitration obliged the parties to submit final pleadings and proceeding costs refund in March
and April 2012.
On 29 February 2012 PKN ORLEN submitted final pleading. Yukos International submitted as well the pleading. On 30 March 2012 PKN
ORLEN and Yukos International submitted the response to the above-mentioned pleadings. On 13 and 27 April 2012 the parties submitted motions for the proceeding cost refund. After the submission of above mentioned pleadings, PKN ORLEN is expecting for the final
decision of the Court of Arbitration.
44.2.2. Compensations due to property damages
• Rafineria Trzebinia S.A. acts as a plaintiff in the proceedings held by District Court in Cracow concerning abuses associated with the realization of investment in installation for the estherification of biodiesel oil, on which Rafineria Trzebinia S.A. claims to incur a loss
of approximately PLN 79,000 thousand. The indictment in this case was raised in December 2010. The Company issued a motion
to the court requesting to oblige the defendant to repair the incurred damages. The claim is being heard in first instance court. On 12
February 2013 the Court discharged the proceedings. The Company complained about the Court’s decision, the complaint has not
been recognised by the court yet.
• AB ORLEN Lietuva is a plaintiff in the compensation proceeding against RESORT MARITIME SA, The London Steamship Owners’ Mutual
Insurance Association Limited, Sigma Tankers Inc., Cardiff Maritime Inc., Heidenreich Marine, Heidenreich Maritime Inc. and Heidmar
Inc. due to losses incurred during the accident in Butinge Terminal (the tanker ship hit a terminal buoy) on 29 December 2005. The total
compensation claim amounts to approximately PLN 71,040 thousand at exchange rate as at 31 December 2012 (representing approximately LTL 60,000 thousand). The proceedings is held in I instance in front of district court in Klajpeda.
44.2.3. Tax proceedings
UNIPETROL RPA s.r.o., acting as a legal successor of CHEMOPETROL a.s., was a party in a tax proceeding related to validity of investment
tax relief for 2005. UNIPETROL RPA s.r.o. claims the return of income tax paid for 2006 and 2005 by CHEMOPETROL a.s. The claim concerns
unused investment relief attributable to CHEMOPETROL a.s. The total value of claim amounts to approximately PLN 52,975 thousand
translated using exchange rate as at 31 December 2012 (representing approximately CZK 325,000 thousand).
44.2.4. Arbitration proceedings against Basell Europe Holding B.V.
On 20 December 2012 PKN ORLEN S.A. sent an arbitration call to Basell Europe Holding B.V. regarding ad hoc
proceeding relating to Joint Venture Agreement signed in 2002 between PKN ORLEN S.A. and Basell Europe Holding B.V. PKN ORLEN
seeks compensation in its own favour or, depending on the court’s decision, in favor of Basell Orlen Polyolefins Sp. z o.o. of PLN 112,110
thousand (representing approximately EUR 27,423 thousand) plus interest. The compensation regards the price of goods manufactured
by Basell Orlen Polyolefins sp. z o.o. which are sold to Basell Sales & Marketing Company B.V. (entity related to Basell Europe Holdings
B.V. in the meaning of Joint Venture Agreement) with the purpose of re-sell. The arbitration proceeding will take place in London Court
of ad hoc Arbitration, acting based on Regulations of United Nation Commission on International Trade Law (UNCITRAL). The process
of selecting members of the Court of Arbitration is in progress.
45. Significant events after the end of the reporting period
PKN ORLEN S.A. announced that the deposit agreement dated 26 November 1999 (with further amendments) constituting the Company’s
global depositary receipts (“GDRs”) concluded with The Bank of New York Mellon was terminated on 27 February 2013. The termination
of the Deposit Agreement resulted from the notice of termination of the Deposit Agreement sent by PKN ORLEN to the Depositary Bank
on 29 November 2012 and expiration of the 90-day notice period from the date of delivery of the above mentioned notice, as stipulated
in the Deposit Agreement.
According to the terms of the Deposit Agreement, the Depositary Bank shall, as soon as possible after the termination of the Deposit
Agreement, sell the PKN ORLEN shares held by the Depositary Bank and related to outstanding GDRs. The Depositary Bank shall deliver
cash from such sale to holders of these GDRs, proportionally to the number of shares represented by GDRs held by them.
218
In connection with the termination of the Deposit Agreement the listing of the GDRs on the Official List of the London Stock Exchange
was cancelled and the GDRs were removed from trading on the London Stock Exchange plc Main Market for listed securities as of 27
February 2013.
PKN ORLEN S.A. announced that the deposit agreement dated 10 April 2001 (with further amendments) constituting the Company’s
American depositary receipts (“ADRs”) concluded with The Bank of New York Mellon was terminated on 4 March 2013. The termination
of the Deposit Agreement resulted from:
• the notice of termination of the Deposit Agreement sent by the Company to the Depositary Bank on 29 November 2012,
• the notice of termination sent by the Depositary Bank to holders of the ADRs on 3 December 2012, and
• expiration of a notice period of at least 90 days commencing on the date of providing the above mentioned notice to holders of the ADRs,
as stipulated by the Deposit Agreement.
According to the terms of the Deposit Agreement holders of ADRs may exchange ADRs for the Company’s shares within one year following the termination of the Deposit Agreement, i.e. until 4 March 2014. Thereafter, the Depositary Bank may sell any remaining shares
related to outstanding ADRs. Holders of ADRs may exchange ADRs for a proportional share of cash from such sale or for the Company’s
shares, if the Depositary Bank does not perform the sale.
On 28 March 2013 expired the agreement between PKN ORLEN and Ashby Sp. z o.o. (that has been concluded on 28 March 2012)
regarding gathering and keeping of mandatory reserves of crude oil. Therefore, and in accordance with applicable regulations regarding
the maintenance of mandatory reserves in Poland, PKN ORLEN acquired crude oil owned by Ashby Sp. z o.o. The value of the transaction
was PLN 1,194,552 thousand translated using exchange rate as at 27 March 2013 (representing USD 366,034 thousand). The price of raw
material was determined based on market quotations.
The transfer of ownership of the raw material to PKN ORLEN has been made on 28 March 2013, after settlement of full amount of the transaction. The acquisition price of crude oil has been hedged with a forward contact. The settlement of the hedging transaction increased
the value of the acquired raw material by PLN 123,615 thousand translated using exchange rate as at 27 March 2013 (representing USD
37,878 thousand). As a result PKN ORLEN recognized the purchase of crude oil of PLN 1,318,167 thousand translated using exchange
rate as at 27 March 2013 (representing USD 403,912 thousand) in the 1 quarter of 2013. Additionally, within the duration of the contract
regarding gathering and maintenance of crude oil reserves, Ashby Sp. z o.o. incurred charges to PKN ORLEN for inventory maintenance
guarantees.
In the reporting period the were no factors or events, other than described above, that may influence future results of the Group.
46. Approval of the financial statement
The foregoing consolidated financial statements were authorized by the Management Board of the Parent Company on 28 March 2013.
Dariusz Krawiec
President of the Board
Vice-President of the Board
Piotr Chełmiński
Member of the Board
Krystian Pater
Member of the Board
Marek Podstawa
Member of the Board
Rafał Warpechowski
Executive Director
Planning and Reporting
219
CONTACT DATA
Polski Koncern Naftowy ORLEN Spółka Akcyjna
ul. Chemików 7, 09–411 Płock, Poland
Head Office:
phone: +48 24 256 00 00
+48 24 365 00 00
fax: +48 24 367 70 01
www.orlen.pl
Warsaw Office
phone: +48 24 256 92 92
+48 24 256 92 93
fax: +48 24 365 53 93
e-mail: media@orlen.pl
Press Office
phone: +48 24 256 92 92
+48 24 256 92 93
+48 24 77 80 109
+48 24 77 80 091
e-mail: media@orlen.pl
Investor Relations Office
phone: +48 24 256 81 80
fax: +48 24 367 77 11
e-mail: ir@orlen.pl
Unipetrol a.s.
Na Pankráci 127
140 00 Praha 4
phone: +42 225 001 444
fax: +42 225 001 447
e-mail: info@unipetrol.cz
AB ORLEN Lietuva
Juodeikiai
89467 Mažeikių r., Lietuva
phone: +370 443 9 21 21
fax: +370 443 9 25 25
e-mail: post@orlenlietuva.lt
ORLEN Deutschland GmbH
Ramskamp 71–75
25337 Elmshorn
phone: +49 (4121) 4750 – 0
fax: +49 (4121) 4750 – 4 3000
e-mail: info@orlen-deutschland.de
220

corporate governance

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