Orlen Spolka Akcyjna · GPW:PKN
Orlen Spolka Akcyjna — Orlen — Investor Day (2020)
55 slides from Orlen Spolka Akcyjna's investor day presentation, 2020
Slide 1: ORLEN Group's 2030 Strategy
ORLEN Group’s 2030 Strategy
Slide 2: Table of contents
Table of contents 01. Our aspirations p. 03 02. ORLEN today p. 11 03. Strategic challenges p. 16 04. ORLEN2030 p. 21 05. Financial foundations p. 41 02 ORLEN Group’s 2030 Strategy
Slide 3: How we envision our business in 2030
How we envision our business in 2030 03 Our aspirations ORLEN today Strategic challenges ORLEN2030 Financial foundations ORLEN Group’s 2030 Strategy
Slide 4: The energy transition is reshaping the environment around us
The energy transition is reshaping the environment around us Technology Consumer Growing cost-effectiveness advances preferences Evolving consumer expectations from providers of goods of renewables and services Proactive and increasingly Electrification of transport conscious consumers and industry E
Slide 5: ORLEN2030 will become a business leader of sustainable transition in Central Europe
In response to challenges, ORLEN2030 will become a business leader of sustainable transition in Central Europe Leading player Leader of energy transition Provider of integrated Socially responsible Stable source in Europe in the region customer services business of value creation Presence in over te
Slide 6: Growth to rely on diversified portfolio of existing and future business lines
ORLEN Group’s growth to rely on diversified portfolio of existing and future business lines Strategic logic Key business areas and segments Share in total CAPEX Upstream Fuel retail Maximising ~35-45% performance Energy/gas Refining distribution Renewable Petrochemicals Strategic power ~45-55% develop
Slide 7: Key focus on renewable and gas-fired power generation as well as petrochemicals
Key focus will be placed on renewable and gas-fired power generation as well as petrochemicals Strategic logic Key strategic directions Upstream Refining Build a portfolio of gas production assets Improve the efficiency of and consolidate refining assets, Maximising and reconfigure existing assets drive f
Slide 8: Major investment in sustainable development
ORLEN2030 strategy envisages major investment in sustainable development Drive decarbonisation and improve energy efficiency Drive development in renewable energy Over PLN 30 bn Expand biofuel and biomaterial capacities in CAPEX for sustainable development, Drive development in recycling including ove
Slide 9: Net zero carbon emissions by 2050
The ORLEN Group aims to become a net zero carbon business by 2050 Carbon emissions Operational target 2030 -20% -20% ORLEN 2030 CO2 emissions reduction target in refining and petrochemicals1 -33% Zero net carbon CO2 emissions per MWh reduction emissions target in power generation Net zero carbon ORLE
Slide 10: Over two and a half times increase of Group's EBITDA
The ORLEN2030 strategy to deliver an over two and a half times increase of Group’s EBITDA > 2,5x PLN 13bn ~PLN 26bn PLN 4bn PLN 9bn ORLEN Group 2019 Acquisitions Strategic growth ORLEN Group 2030 (ENERGA, possibly LOTOS) Note: This material does not factor in the effects of the proposed acquisition
Slide 11: Our growth so far
Our growth so far 11 Our aspirations ORLEN today Strategic challenges ORLEN2030 Financial foundations ORLEN Group’s 2030 Strategy
Slide 12: Among the fastest-growing fuel sector players
In the last decade, the ORLEN Group has been among the fastest-growing fuel sector players Over the past years, the ORLEN Group has … and at the time of crisis sparked by COVID-19 far outpaced its competitors… it has showed the greatest resilience Historical 10-year growth in LIFO-based EBITDA1 Chan
Slide 13: The ORLEN Group continued to pursue its strategic objectives
The ORLEN Group continued to pursue its strategic objectives Solid performance and implementation of investment projects Increase in dividend payout EBITDA LIFO (PLNbn) CAPEX (PLNbn) Dividend paid in a year (PLN/share) 10,3 3,5 9,0 9,8 7,8 6,8 5,5 3,0 3,0 2,0 Target: 2019–2020 Actual 2019 Actual Tar
Slide 14: Steps taken to drive continued rapid growth
The ORLEN Group has taken a number of steps to drive continued rapid growth Dynamic growth of retail Continued expansion of the Stop Cafe 2.0 format, entry into new markets, and acquisition of RUCH Energa Group oup acquisition Acquisition of an 80% equity interest in n Energa, a tender offer for the
Slide 15: Sound and sustainable foundation for further growth until 2030
With these efforts, the ORLEN Group has laid a sound and sustainable foundation for further growth until 2030 Refining Petrochemicals ochemicals Energy gy Retail Upstream 6 refineries 40 3,2 GW >2,800 service stations ~200 mboe across five markets in Poland, Czech Republic petrochemical products, of in
Slide 16: Why we are changing
Why we are changing 16 Our aspirations ORLEN today Strategic challenges ORLEN2030 Financial foundations ORLEN Group’s 2030 Strategy
Slide 17: Profound changes with structural impact on the energy sector
The world is undergoing profound changes, with a structural impact on the energy sector Slowing pace of growth Shifts in oil and gas Competitive new Environmental Consumer in oil demand supply energy sources concerns megatrends Peak Oil expected between 2030 Shale revolution in North America Some RE
Slide 18: Renewable energy sources to predominate the global mix
Renewable energy sources to predominate the global mix within coming years Average annual growth in global primary energy demand in 2018–2040, by fuel type (%) 6,9 1,5 1,9 1,6 0,5 1,0 0,1 Coal Crude oil Natural gas Nuclear Biomass Hydropower RES Source: IEA World Energy Outlook 2019, OPEC World Oil
Slide 19: Changes in Europe opening new value areas
Changes in Europe are opening new value areas, with the regional pace of the changes more advantageous to the ORLEN Group Crude oil ~0,7x ~1,0x RES ~1,2x ~2,0x Fuel demand (mb/d) Installed RES capacity (GW) ~15 ~0,9 ~0,9 ~600 ~70-75 ~11 ~495 ~37 2019 2030 2019 2030 2019 2030 2019 2030 Europe Central
Slide 20: Energy transition creating new opportunities
Energy transition is creating new attractive opportunities for fuel and energy producers New potential business models Hydrogen E-mobility Biomass- and Power generation waste-to-energy and storage Hydropower Gas-fired power CNG/LNG Solar power Wind power Recycling of plastics 20 Our aspirations ORLEN
Slide 21: How we will deliver on our ambitions
How we will deliver on our ambitions 21 Our aspirations ORLEN today Strategic challenges ORLEN2030 Financial foundations ORLEN Group’s 2030 Strategy
Slide 22: ORLEN2030 to evolve into a more sustainable multi-utility business
In response to the energy transition, ORLEN2030 will evolve into a more sustainable multi-utility business Excellence in existing Entry into new promising business lines business segments Sustainable upstream Renewable energy production Efficient refining New mobility Integrated and advanced Recycling
Slide 23: Pillars of growth and transformation until 2030
Plans to develop into a multi-utility involve the addition of new promising business lines to the existing portfolio Pillars of the ORLEN Group’s growth and transformation until 2030 Efficient Integrated Low-carbon power Integrated Sustainable refining and advanced generation retail upstream production
Slide 24: Refining: integrated and efficient business, expanding biofuels
Refining: we will manage an integrated and efficient refining business and further expand the biofuel business Regional leader Player effectively Major producer in efficient leveraging of biofuels refining integration synergies and alternative fuels Selective upgrades and Integration of refining Significant
Slide 25: Refining: Central Europe's leader in efficient refining
Refining: we will remain Central Europe’s leader in efficient refining Biofuels production EBITDA LIFO >6x >2,5x capacities ~2m tonnes ~PLN 7bn PLN 2.8bn ~0.3m tonnes 2019 2030 2019 2030 Reduction of CO2 CAPEX -20% emissions from refining 100% 80% PLN 2.4bn 2020 2030 2021–2030 average 25 Our aspirations
Slide 26: Petrochemicals: new capacities, speciality products and recycling
Petrochemicals: we plan continued investment in new capacities, with a focus on speciality products and recycling One of Europe’s Presence in advanced Strong position Strong position largest integrated petrochemicals in polymers in mechanical petrochemical and chemical recycling Expanding positions
Slide 27: Petrochemicals: one of Europe's largest integrated producers
Petrochemicals: we are set to become one of Europe’s largest integrated petrochemical producers and expand our recycling business Share of speciality EBITDA LIFO >1,6x >3,0x products in the portfolio ~25% ca. PLN 7bn ~16% PLN 2.3bn 2019 2030 2019 2030 Plastics recycling CAPEX capacity 0.3-0.4m tonne
Slide 28: Energy: leader in energy transition in Poland and the region
Energy: we are set to become a leader in energy transition in Poland and in the region, generating energy from low- and zero-carbon sources 1 Regional leader Leading player Broad portfolio of in renewable energy in gas-fired power distribution assets generation generating stable profits Investment in
Slide 29: Power generation: fivefold increase in installed RES capacity
Power generation: our projects will deliver a fivefold increase in installed RES capacity by 2030 RES capacity EBITDA LIFO 5.0x >4.0x >2.5 GW ~PLN 7bn 0.5 GW PLN 1.6bn 2019 2030 2019 2030 Gas-fired capacity >1.8x CAPEX >2.0 GW PLN 4.7bn 1.1 GW 2019 2030 2021–2030 average 29 Our aspirations ORLEN today
Slide 30: Retail: strengthening network and expanding non-fuel business
Retail: we will significantly strengthen our retail network in the region, largely expanding our non-fuel business Regional leader New growth platforms Continuous service in fuel retail making for an integrated quality improvement retail offering Expanding the service station Further rollouts within
Slide 31: Retail: consolidating leading position in Central Europe
Retail: we will consolidate our leading position in Central Europe and roll out new services Gross non-fuel EBITDA 1.5x >1.5x margin growth ~150% or more ~PLN 5bn 100% PLN 3.1bn 2019 2030 2019 2030 Share of foreign sites >1,2x CAPEX in the total number of service stations ~37% >45% PLN 1.1bn 2019 20
Slide 32: Upstream: sustainable portfolio growth focused on natural gas
Upstream: we will ensure sustainable portfolio growth, with a focus on natural gas assets Extensive portfolio of Expansion of current Maximising value from natural gas assets operations in Poland upstream assets and production Cautious expansion of Start of production Increasing competitiveness the
Slide 33: Upstream: better cover hydrocarbon demand with own production
Upstream: we will be able to better cover our hydrocarbon demand with our own production Coverage of internal EBITDA LIFO >5.0x gas demand ~20% ~PLN 1bn PLN 0.2bn 0% 2019 2030 2019 2030 Hydrocarbon >2,5x CAPEX production, daily ~50 kboe/d ~18 kboe/d PLN 0.9bn 2019 2030 2021–2030 average If the PGNiG
Slide 34: ORLEN2030: region's leading multi-utility with strong asset portfolio
By following the strategy, ORLEN2030 is set to become the region’s leading multi-utility with a strong asset portfolio ORLEN2019 ORLEN2030 Refining capacities in key markets ~36m tonnes/year 45m tonnes/year Refining Biofuel production, including 2G biofuels (NIT/NRT compliant) ~0.3m tonnes ~2m tonnes
Slide 35: Increased spending on innovation and green technologies
ORLEN2030 will increase spending on innovation, including green technologies that help minimise environmental impacts Over the next ten years we intend to spend up to 3% of CAPEX (totalling approximately PLN 3bn) on innovation and R&D, with a focus on green technologies We believe innovation and new
Slide 36: Digital transformation across all segments
A vital element of the ORLEN2030 strategy will be the digital transformation of the business across all segments We will digitalise internal processes and customer interfaces We will deploy integrated and flexible digital solutions to substantially improve process efficiency and reduce the environmenta
Slide 37: Advanced operating model to support strategic goals
In order to support the delivery of the strategic goals we will implement an advanced operating model We will align the ORLEN Group’s operating model with the scale of our operations We are about to commence the process of integrating Energa and, possibly, Grupa LOTOS, which is bound to significantly
Slide 38: Talent and human capital development
Talent and human capital development will be crucial to building ORLEN2030 We will develop human resources ready for the transition to a new operating model Long-term growth and business diversification require human capital with a broad range of skills and competences. Our efforts addressing these c
Slide 39: Sustainable development initiatives part of ORLEN2030
Sustainable development initiatives are an integral part of the ORLEN2030 strategy Investment in the RES Further reduction of Monitoring of portfolio and biofuels workplace accident the value chain rates (TRR) and suppliers >2.5 GW in terms of ESG of renewable capacity TRR <1.5 compliance ORLEN Grou
Slide 40: Everything we do is underpinned by our values
Everything we do at the ORLEN Group is underpinned by our values Responsibility Development People Energy Reliability Business Innovation Ethics Power Safety Society Competitiveness Professionalism Courage Quality Environment Modernity Cooperation Success Compliance 40 Our aspirations ORLEN today St
Slide 41: How much we will invest and what returns we expect
How much we will invest and what returns we expect to deliver 41 Our aspirations ORLEN today Strategic challenges ORLEN2030 Financial foundations ORLEN Group’s 2030 Strategy
Slide 42: Solid financial foundations as a cornerstone for growth
Solid financial foundations as a cornerstone for growth I. Efficient investments and value creation by ORLEN2030 Ambitious CAPEX programme: ~PLN 140bn, comprising: ~PLN 85bn of total CAPEX in new areas (Strategic Development and Investing in the Future) ~PLN 55bn of total CAPEX for key existing assets
Slide 43: Investment in new business areas with emphasis on efficiency
Focus on investment in new business areas with strong emphasis on efficiency Strategic logic Key business areas and directions 2021−2030 CAPEX (PLNbn) Upstream Fuel retail Maximising ~55 performance Refining Energy/gas distribution Renewable Petrochemicals power Strategic ~75 development Gas-fired Non-f
Slide 44: Key investment planned for the first half of the decade
Key investment planned for the first half of the decade Indicative time frame of investments 2021 2030 Efficiency Refining Decarbonisation Basic Petrochemicals Advanced Gas-fired Energy RES Fuel Retail Non-fuel Upstream 44 Our aspirations ORLEN today Strategic challenges ORLEN2030 Financial foundations O
Slide 45: Stable balance sheet underpinned by well-balanced funding sources
Stable balance sheet underpinned by well-balanced funding sources I. Strong ability to cover CAPEX from ORLEN Group’s financial capacity until 2030 (PLNbn) current operating cashflow Aligning the CAPEX plan with the Group’s current financing capabilities III. II. Maintaining safe debt levels Other Alte
Slide 46: Grow and diversify EBITDA by 2030
We will substantially grow and diversify our EBITDA by 2030, building ORLEN2030’s resilience to market fluctuations ORLEN Group’s LIFO-based EBITDA growth by business segment (PLNbn) EBITDA stabilisation through increased contributions from Petrochemicals and Power Generation +2 +1 ~26 +5 Double-digi
Slide 47: Sharing profits with shareholders on a regular basis
We intend to share profits with shareholders on a regular basis, and our dividend payouts will reflect ORLEN2030 growth Annual dividends paid by PKN ORLEN (PLN per share) Transparent dividend policy Return to pre-COVID 19 dividend payouts PLN 3.50 3,50 or more Minimum PLN 3,50 per share 3,00 3,00 for
Slide 48: — j
— j
Slide 49: Appendix 1: Abbreviations, definitions and units
Appendix 1 Abbreviations, definitions and units 49 ORLEN Group’s 2030 Strategy
Slide 50: List of abbreviations, definitions and units used in the Strategy
List of abbreviations, definitions and units used in the Strategy Abbreviation/unit Explanation bbl (barrel) unit of measure used in the oil industry. 1 barrel of oil = 42 US gallons = 158.9683 litres (~159 litres). In Europe, oil is commonly measured in tonnes boe barrel of oil equivalent. Used cust
Slide 51: List of abbreviations, definitions and units used in the Strategy
List of abbreviations, definitions and units used in the Strategy Abbreviation/unit Explanation kboe/d thousand barrels per day LNG liquefied natural gas Mcf million cubic feet MW / GW megawatt/gigawatt MWh megawatt hour NRT National Reduction Target NIT National Indicative Target RES renewable energy
Slide 52: Definitions of Key Performance Indicators (KPIs) used in the Strategy
Definitions of Key Performance Indicators (KPIs) used in the Strategy Indicator Unit of measure Definition Non-fuel margin % Non-fuel margin comprises store margin, bistro margin, revenues from suppliers (contributions), car wash and other revenues and services Crude throughput m tonnes Volume of crud
Slide 53: Appendix 2: Macroeconomic assumptions
Appendix 2 Macroeconomic assumptions 53 ORLEN Group’s 2030 Strategy
Slide 54: Macroeconomic assumptions
Macroeconomic assumptions Macroeconomic factor Unit of measure 2021–2025 average 2026–2030 average Brent-Urals differential USD/bbl 1,48 2,10 Model refining margin USD/bbl 4,1 4,9 Model petrochemical margin EUR/t 884 1 113 Brent crude price USD/bbl 57,8 79,4 Canadian Sweet Light crude price CAD/bbl 5
Slide 55: Legal disclaimer
Legal disclaimer This Presentation has been prepared by PKN ORLEN (“PKN ORLEN” or the “Company”). Reproduction, distribution and transmission of this Presentation in other jurisdictions may be restricted by law, and recipients should inform themselves about and observe any such restrictions. Failure