pkn orlen: value growth and strategy implementation ...€¦ · pkn o r l e n own f i na nc ial re...
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PKN ORLEN: value growth and strategy implementation – activity update
Igor Chalupec, CEOSeptember 2006
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Mažeikių Nafta acquisition process– updatePKN ORLEN is consequently executing steps in order to close the transaction
Yukos International UK B.V., Government of Lithuania and PKN ORLEN signed the agreement for the sale/purchase of the Mazeikiu Nafta stake - Yukos 53.70% ( signed on May 26th) and GoL 30.6% (signed on June 9th)
Approval of the Lithuanian government for Agreement signed with Yukos Int. UK B.V.
Approval of the Lithuanian Parliament for the Agreement signed with Lithuanian
Government
GOL’s failure to exercise its right of first refusal with respect to the shares
being purchased by PKN ORLEN from Yukos International
Consent of the Antimonopoly Commission in Ukraine
Consent of the United States anti-trust authorities
European Commission clearancePKN ORLEN to submit the application seeking consent for the transactions for the purchase of the majority of Mazeikiu Nafta shares
Once closing conditions are satisfiedSimultaneous closing of both transactions is expected, at the latest, in Q4 2006
2Q 2006
Activities already
accomplished - in order to
close the transaction
Process to closing
After Closing Mandatory tender offer for 5.64% public float will be launched
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Mažeikių Nafta acquisition process – updateAdvanced state of financing planning for the transaction
280
250
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500
1000
1500
2000
2500
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sour
ces
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acqu
isiti
on
MN
pay
men
t
mln USD
STAGE 2: Planning new financial sources
• Revolving credit EUR 800 million
(5 years with the possibility of extending)
• Bridge credit
EUR 800 million(up to 12 months)
STAGE 3: Refinancing of the bridge credit
• Issue of bonds on the European market (4Q 2006 or 1H 2007)
Mažeikių Nafta acquisition: financial sources
Partial use of the present credit
lines
STAGE 1: Preparing own financial resources
• Cash in hand (in 3Q06 around USD 250 million)
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Mažeikių Nafta acquisition process – updateMažeikių Nafta included in segment management structure immediately after acquisition
Gradual integration (e.g. as in Unipetrol)
Taking advantage of the Unipetrol integration experience
Taking control (~1 year)
Integration (~1 year)
Realisation of the development and
value growth possibilities
Immediate integration, starting from Day One
(1-1.5 year)
Realisation of the development and
value growth possibilities
Taking over control and simultaneously integrating MN into the segment management structures, PKN ORLEN will accelerate the process.
It will positively impact on value creation in MN
It will unlock additional opportunities in PKN ORLEN
Accelerated “segment” approach to the Mažeikių Nafta integration
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UNIPETROL EBITDA* assuming average 2004 macroeconomic conditions (EUR m)
An improvement of over EUR 30 million has
already been captured in 2005
442
304138
304
45%
Partnership Programme effects:almost EUR 40 m in 1H’2006, assuming average 2004 macroeconomic conditions
PKN ORLEN and Unipetrol integrationPartnership Programme realization well on track
Q1’2006 Q2’2006
17.1 22.6
Partnership Programme Leaders :In EUR mln in 1H’06Uniraf : 16.1Chemopetrol: 14.8
Impact of Partnership Programme% EBITDA increase
2004 baseline result
* Consolidated EBITDA includes UNIPETROL, UNIPETROL Rafinerie, Paramo, Chemopetrol, Kaučuk, Spolana, BENZINA consolidated fully, Česká Rafinérská consolidated following the proportional method and Agrobohemie and Aliachem consolidated following the equity method. EBITDA calculations do not consider the effects of possible divestments
** Adjusted for one-off expenses as well as non-operating and extraordinary charges*** Expected EBITDA forecast calculated under fixed 2004 macroeconomic conditions: Brent crude USD 38.2/b, Brent/Ural differential USD 4.1/b, refinery margin
USD 3.6/b, CZK/EUR 31.90 Source: Unipetrol
2008*** resultin 2004 conditions
2004 operating result**
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PKN ORLEN and Unipetrol integrationAdvanced preparations for implementation of segment base management
Phase 2Design & Construct
Phase 3Implementation
June’06 Q3’06 Q4’06 - 2007
Phase 1Shared Service Strategy
Final preparation of the implementation phase
Define scope of functional split in production, sales and support functions
Prepared mapping plan of Unipetrol segments with PKN ORLEN
Centralize all functions (both corporate and service)
Align structure in functional segments (e.g., purchasing, IT) with PKN ORLEN functional
managers as executives in Shared Service Centre (SSC)(SSC: Finance accounting, Tax, HR, Legal, IT, Supply chain, Purchasing, Maintenance)
Key activities undertaken in process of preparation to implement segment base management
Support the capture of synergies by creating functional segmentswithin Unipetrol
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PKN ORLEN and Unipetrol integrationSplit processing and commercial functions in key Unipetrol subsidiaries
Refining Petchem Retail Lubes/Bitumens
Production/ processing Česká
RafinerskáChemopetrol
production
UNIPETROLlubes/
bitumenbusinesses
*
* Integration of Paramo fuels with UniRaf to be resolved** Integration of olefin sales to UniRaf to be resolved
Commercial
Support functions
Corporate centre
Shared services: Finance accounting, Tax, HR, Legal, IT, Supply chain, Purchasing, HSF, Maintenance
UNIPETROL, a.s.: Controlling, Strategy, Planning, Risk management, Change management, Internal audit
BenzinaChemopetrol
commercial**
UniTrade
Refining
UniRaf
Wholesale
PKN ORLEN segments
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PKN ORLEN and Unipetrol integrationNew initiatives in HR
MBO system related issues:• A further step for alignement with PKN ORLEN is the implementation of MBO• The MBO committee for coordination and monitoring of MBO targets
(financial and operational) will start to work in Q4 2006.• MBO will cover 224 employees in 2006 and a further 172 employees in 2007
(in the whole PKN ORLEN Capital Group, the MBO system will cover 803 employees in 2006 and 1,262 in 2007)
•
New HR tools to be implemented :New HR tools for more effective and transparent work with staff will be proposed
for new structure such as:• SDP= succession development planning• risk assesment for high potential employees,• IDP = individual development plan
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External environmentHigh volatility of margin and differential. Data to September 25th, 2006
0123456789
1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep
Q2'2006 Q2'20052006E Q3'2006
02
468
1012
1416
1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep
Q2'2006 Q2'20052006E Q3'2006
2,5
3,0
3,5
4,0
4,5
5,0
1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep
PLN/USD Q2'2006 PLN/EUR 2Q'2006PLN/USD 2006E PLN/EUR 2006EQ3'2006
Average exchange rates1
2 2
Refinery margin$4.00/b average in 3QTD’20063 Decrease by 34% y/y and 29% q/q
Brent/Ural differential$3.8/b average in 3QTD 2006 Decrease by 15.5% y/y and by 21% q/q
2
3Q’ 06
September 25
3 Q’ 06
September 25
2 kw.06
3Q’06
Brent crude oil$70.3/b average in 3QTD 2006 Increase by 14.5% y/y and 1% q/q
0102030405060708090
1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep
Q2'2006 Q2'2005
2006E Q3'20063 Q’ 06
September 25 September 25
22
1) Source: NBP (Polish National Bank)2) Estimates published in PKN ORLEN Strategy
3) Calculated as: Products (88.36%) vs. Brent Dtd (100%). Products contain Premium Unl (25.21%), USLD (23.20%), Naphtha (16.51%), LHO (15.31%), HSFO (5.44%) i Jet (2.69%)
(source: CIF NWE quotations, except HSFO FOB ARA)
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Petrochemical market Quotation improvement for olefins and polyolefins. Data to Septembers 15th 2006
0
100
200
300
400
500
600
700
800
900
1000
1-Jan 1-Apr 1-Jul 1-Oct 1-Jan 1-Apr 1-Jul
Ethylene Average (Ethylene-Naphta) Naphta
Ethylene
398413
211
398
Spread (Ethylene-Naphfa)
338
0
100
200
300
400
500
600
700
800
900
1-Jan 1-Apr 1-Jul 1-Oct 1-Jan 1-Apr 1-Jul
Propylene Average (Propylene-Naphta) Naphta
293353
211
383
Spread (Prophylene-Naphta)
338 346
Propylene
in EUR/tone
346386
in EUR/tone
416
Source: Market quotations
0
200
400
600
800
1000
1200
1-Jan 1-Apr 1-Jul 1-Oct 1-Jan 1-Apr 1-Jul
PP Average (PP-Propylene) Propylene
176296
376257
Spread (Prophylene-propylene)
Polyethylene (LDPE) Polypropylene
0
200
400
600
800
1000
1200
1-Jan 1-Apr 1-Jul 1-Oct 1-Jan 1-Apr 1-Jul
PE Average (PE-Ethylene) Ethylene
352
166
357 286
Spread (PE-Ethylene)
272 237
in EUR/tone
267275 267
in EUR/tone
258
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Operating results after 2 months of Q3’06Significant volume sales increase in Poland and in whole Group
Key operating data
July-August 2005 July-August 2006 y/y [%] y/y [%]
PKN ORLEN parent
companyPKN ORLEN
PKN ORLEN parent
companyPKN ORLEN
PKN ORLEN parent
companyPKN ORLEN
Wholesale fuel volume sales (kt) 1,4 890 1,439 1,009 1,520 13.4% 5.6%
Petrochemical volume sales (kt) 4 133 335 279 408 109.8% 21.8%
Retail volume sales (m litres) 2 687 1,028 729 1,095 6.1% 6.5%
Utilisation ratio3 93% 105% 12.5%
Crude oil throughput (kt) 2,096 2,883 2,411 3,238 15.0% 12.3%
1) Refers to gasoline, diesel, Jet, LHO2) Refers to retail sales of gasoline, diesel, LPG3) Refers to deep processing capacity at PKN ORLEN 13.5 m t/y in 2005 and 13.8 m t/y in 20064) Refers to PKN ORLEN parent company excluding export
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Retail segment in PolandFavourable effects from continuation of implemented initiatives
Area Effects of the initiatives undertaken in retail segment
Quality service
Sales
Sales dynamics at a satisfactory level of 6.1% in Poland (for July-August 2006, y/y) and 6.5% for whole Group.BLISKA sites recorded ca 30% volume sales increase on like-for-like basis. Average throughput per site in whole network is ca 2.1 ml/l annuallyDynamic increase by ca 12% on non-fuel sales in our shops y/y (for July-August 2006)
Modern management systems, marketing support, new initiatives and loyal employees results in better network performance.
We have recorded an increase in average number of transaction by ca. 6% q/q and average value of these transactions by 5% q/q
InvestmentsCapex plan realisation is on track in terms of the investments fulfilled and cash spendCurrently we operate under 109 BLISKA sites. By the end of 2006 we plan to operate 176
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Thank you for your attention
For more information please contact the IR Department: phone: + 48 24 365 33 90fax: + 48 24 365 56 88e-mail: [email protected]
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Main oil & gas assets in Central Europe and logistics infrastructure
Lisichansk(8.5; 8.2)
Home markets of PKN ORLEN
Refinery (capasity m tonnes p.a.; Nelson complexity index)
Source: Oil & Gas Journal (as of January 2005), PKN Orlen, others , Concawe,Reuters, WMRC, EIA, NEFTE Compass, Transneft.ru
Batman (1.1; 1.9)
Yaroslavi
Sea terminal [capacity]Oil pipeline Ca [capacity]
Ingolstadt (5.2; 7.5)
Litvinov (5.5, 6.7)
Kralupy(3.4; 9.8)
Plock (13.8; 9.5)
Gdansk (90.0)
(6; 11.1)
Mazeikiai (10.0; 9.0) Novopolotsk
(8.3; 7.7)
Mozyr(15.7; 4.6)
Bratislava (6.0; 12.3)
Schwechat(10.2; 6.2)
Burghausen(3.5; 7.3)
Holborn (3.8; 6.1)
Bayernoil(12.8; 8.0)
Harburg(4.7; 9.6)
Leuna(11.0; 7.1)
Schwedt (10.7; 10.2)
Aspropyrgos(6.6; 8.9)
Corinth (4.9; 12.5)
Elefsis(4.9; 1.0)
Thessaloniki (3.2; 5.9)
Izmit (11.5; 6.2)
Izmir (10.0; 6.4)
Kirikkale (5.0; 5.4)
Duna(8.1, 10.6)
Arpechim(3.6; 7.3)
Petrobrazi(3.4; 7.3)
Petrotel(2.6; 7.6)
Rafo(3.4; 9.8)
Petromidia(5.1; 7.5)
Rijeka (4.4; 5.7)
Sisak (3.9; 4.1)
Novi Sad (4.0; 4.6)
Pancevo(4.8; 4.9)
Neftochim(5.6; 5.8)
Drogobich(3.8; 3.0)
Kremenchug (17.5; 3.5)
Odessa(3.8; 3.5)(ex 12)
Kherson (6.7; 3.1)
DRUZHBA
DRUZHBA
DRUZHBA
ADRIA
IKL
ADRIA
(49.1) Ventspils
Butinge(38.2)
(163.7) PrimorskKirishi
Yuzhniy(ex 4)
Brody
Tiszaojvaros
Triest
Rostock
[Ca 78]
[Ca 60]
[Ca 34][Ca 18]
[Ca 82][Ca 50]
[Ca 34]
Ca 27
[Ca20][C
a 30
]
[ Ca
24]
[Ca 15]
Novorossiysk(ex 45)
[ Ca 29]
Trzebinia (0,5)
Orlen OilJedlicze (0,1)
[Ca 45]
[Ca 13]
[Ca 25]
[Ca 120]
Rafineria PKN ORLENProjected Oil pipeline