ORLEN Spolka Akcyjna · GPW:PKN
ORLEN Spolka Akcyjna — PKN Orlen — Investor Presentation (January 2006)
34 slides from ORLEN Spolka Akcyjna's investor presentation, Jan 10, 2006
Slide 1: PKN ORLEN Strategy Update 2006-2009
PKN ORLEN Strategy Update 2006-2009 Igor Chalupec, President and Chief Executive Officer Paweł Szymański, Chief Financial Officer 10th January 2006 1
Slide 2: Agenda
Agenda Strategy Implementation Status Strategy Update Financial Targets Supplementary Slides 2
Slide 3: Main assumptions of PKN ORLEN Strategy 2005-2009
PILLAR 1 Implement improvements and investments PILLAR 2 Strengthen existing core businesses in home markets Main assumptions of PKN ORLEN Strategy 2005-2009 Monitor expansion PILLAR 3 opportunities on new markets Strategy z Change of corporate culture – remedy of the situation within the Company z
Slide 4: Strategy Implementation - Pillar 1
PILLAR 1 Implement improvements and investments Strategy Implementation - Pillar 1 PILLAR 2 Strengthen existing core businesses in home Change of corporate culture and introduction of modern principles of Group’s management as a starting point for the Strategy implementation markets Monitor expansio
Slide 5: Strategy Implementation - Pillar 1
PILLAR 1 Implement improvements Strategy Implementation - Pillar 1 and investments Redefinition of PKN ORLEN’s role in the Polish energy security system Strengthen existing core PILLAR 2 businesses in home markets Monitor expansion PILLAR 3 opportunities on new markets • Complex solution of Naftopor
Slide 6: Strategy Implementation - Pillar 1
PILLAR 1 Implement improvements Strategy Implementation - Pillar 1 and investments Final solution to the Company’s troublesome legacy Strengthen existing core PILLAR 2 businesses in home markets Monitor expansion PILLAR 3 opportunities on new markets • The new Management Board of PKN ORLEN thoroughl
Slide 7: Strategy Implementation - Pillar 1
PILLAR 1 Implement improvements Strategy Implementation - Pillar 1 and investments Effective execution of the retail network development plan on the Polish market Strengthen existing core PILLAR 2 businesses in home markets Monitor expansion PILLAR 3 opportunities on new markets Summary Summary of o
Slide 8: Strategy Implementation - Pillar 1
PILLAR 1 Implement improvements and investments Strengthen existing core Strategy Implementation - Pillar 1 Restructuring and development of Orlen Deutschland PILLAR 2 businesses in home markets Monitor expansion PILLAR 3 opportunities on new markets EBITDA (mm EUR) Key financial figures (2009) 40 3
Slide 9: Strategy Implementation - Pillar 1
PILLAR 1 Implement improvements and investments Strategy Implementation - Pillar 1 PILLAR 2 Strengthen existing core businesses in home Integration of Unipetrol - launch of the Partnership programme as a source of additional profit for PKN ORLEN markets Monitor expansion PILLAR 3 opportunities on ne
Slide 10: Strategy Implementation - Pillar 1
PILLAR 1 Implement improvements Strategy Implementation - Pillar 1 and investments Cost reduction as an important source of efficiency enhancement Strengthen existing core PILLAR 2 businesses in home markets Monitor expansion PILLAR 3 opportunities on new markets KPRKO KPRKO • Preliminary estimates
Slide 11: Strategy Implementation - Pillars 2 & 3
PILLAR 1 Implement improvements Strategy Implementation - Pillars 2 & 3 and investments Efficiency projects were accompanied by development projects Strengthen existing core PILLAR 2 businesses in home markets PILLAR 3 Monitor expansion opportunities on new markets z Start-up of Olefin II plant foll
Slide 12: Strategy Implementation
Strategy Implementation Our actions have been well-received and recognised by the market z Best Refinery in Central and Eastern Europe – award by World Refining Association – Central & Eastern European Refining and Petrochemicals 8-th Annual Roundtable – for the technological innovation, infrastruct
Slide 13: Agenda
Agenda Strategy Implementation Status Strategy Update Financial Targets Supplementary Slides 13
Slide 14: Updated Strategy assumes focus on non-organic growth
Updated Strategy assumes focus on non-organic growth along with continuation of pro-effective activities z The change in the Group’s managing principles has proved successful in restructuring which was the foundation of Pillar 1 of the strategy z The Group’s updated strategy assumes that efficiency-
Slide 15: Main oil assets in Central Europe
Main oil assets in Central Europe Primorsk (ex 42) R Kirishi Yaroslavi R Ventspils DRUZHBA Butinge Mazeikiai Gdansk R (12.8; 9) Novopolotsk (8.3; 7.7) (4.4; 11.1) Rostock R R Holborn (3.8; 6.1) Schwedt Harburg (10.7; 10.2) Mozyr (4.7; 9.6) DRUZHBA (15.7; 4.6) Plock Leuna (13.8; 9.5) (11.0; 7.1) Litv
Slide 16: Upstream activities as a response to the strategic challenge
Upstream activities as a response to the strategic challenge of developing own feedstock base and a real opportunity to increase shareholder value • Strong sector fundamentals ¾ New opportunities stemming from the need to increase investments and the opening of countries with large oil deposits to n
Slide 17: Targets for upstream development
Targets for upstream development Planned production and anticipated crude throughput z z (mm t/year) Reserves (mm t) Production Throughput¹ 27,7 20,9 19,3 17,6 7,6 4,3 3,2 0,4 1,2 2007 2010 2015 2007 2010 2015 z Integration ratio2 z CAPEX (USD mm/year) 30% 25% 438 20.6% 20% 15% 6.2% 130 10% 2.3% 5%
Slide 18: Assumed phased development of expertise and risk mitigation
Assumed phased development of expertise and risk mitigation, with an option to accelerate if Phase I of the plan is successful Phase II – Phase – mid-term mid-term horizon horizon Phase Phase II II – – long-term long-term horizon horizon 2006 - 2009 2006 - 2009 2009 - 2015 2009 - 2015 z Develop the
Slide 19: Agenda
Agenda Strategy Implementation Status Strategy Update Financial Targets Supplementary Slides 19
Slide 20: Assumptions of the PKN ORLEN Strategy Update 2006 – 2009
Assumptions of the PKN ORLEN Strategy Update 2006 – 2009 Main assumptions Main assumptions of of the the financial financial plan plan • Reflects the acquisition of Unipetrol holding, in particular: ¾ Unipetrol consolidation as at June 1, 2005 ¾ Unipetrol’s investment IRR of 28% (including synergies
Slide 21: Explanation of differences between LIFO and weighted average results
Explanation of differences between results according to LIFO and weighted average methods at the example of crude oil z Commentary z PKN ORLEN crude inventories (th. tonnes) Change of inventories adjusts the production cost of products sold which directly 2000 impacts EBIT 1800 According to LIFO m
Slide 22: Increase of PKN ORLEN strategic goals for 2009
Increase of PKN ORLEN strategic goals for 2009 z Strategy 2005-20091 z Strategy Update¹ Variable 2 3 3 Variable scenario scenario2 Constant Constant scenario scenario3 Constant Constant scenario scenario3 z EBITDA > PLN 6.0 bn z EBITDA PLN 7.9 bn z EBITDA PLN 10 bn z ROACE >17,5% z ROACE 21,3% z ROA
Slide 23: Influence of potential core business acquisitions on strategic financial targets
Influence of potential core business acquisitions on strategic financial targets • In case of major acquisition and related debt increase, maintaining an investment grade will remain a main priority for Management Board, through: ¾ consequently reducing a debt to levels set in the strategy, i.e. thr
Slide 24: Further EBITDA growth
Further EBITDA growth Comparison in constant 2004 macroeconomic environment1 z EBITDA 2009 PLN mm 1,5 0,6 10,0 7,9 EBITDA 2009 (as of February 2005) Optima Other initiatives, additional investments EBITDA 2009 (as of January 2006) and efficiency improvement of companies in the Group z ROACE 2009 z C
Slide 25: Refinery (refining and oil segments)
Refinery (refining and oil segments) EBITDA and investment plan Refinery segment CAPEX 2006-2009 Refinery segment EBITDA in 2009 (PLN bn, % of total CAPEX) (PLN bn, % of total EBITDA) New investments in PKN ORLEN Strategy Update 2006 - 2009 100% PLN bn, % of total EBITDA Investments in PKN ORLEN Str
Slide 26: Petrochemicals
Petrochemicals EBITDA and investment plan Petrochemicals segment CAPEX 2006-2009 Petrochemicals segment EBITDA in 2009 (PLN bn, % of total CAPEX) (PLN bn, % of total EBITDA) New investments in PKN ORLEN Strategy Update 2006 - 2009 100% PLN bn, % of total EBITDA Investments in PKN ORLEN Strategy 2005
Slide 27: Chemicals
Chemicals EBITDA and investment plan Chemicals segment CAPEX 2006-2009 Chemicals segment EBITDA in 2009 (PLN bn, % of total CAPEX) (PLN bn, % of total EBITDA) New investments in PKN ORLEN Strategy 100% Update 2006 – 2009 Investments in PKN 6% 100%=10 bn PLN ORLEN Strategy 2005 - 2009 0,8 7,4 13,6 6,
Slide 28: Retail
Retail EBITDA and investment plan Retail segment CAPEX 2006-2009 Retail segment EBITDA in 2009 (PLN bn, % of total CAPEX) (PLN bn, % of total EBITDA) New investments in PKN ORLEN Strategy Update 2006 - 2009 100% PLN bn, % of total EBITDA 16,3% 16% Investments in PKN ORLEN Strategy 2005 - 2009 2,2 2,
Slide 29: Upstream
Upstream EBITDA and investment plan Upstream segment CAPEX 2006-2009 Upstream segment EBITDA in 2009 (PLN bln, % of total CAPEX) (PLN bln, % of total EBITDA) New investments in PKN ORLEN Strategy 8% 100% PLN bn, % of total EBITDA Update 2006 - 2009 Investments in PKN ORLEN Strategy 2005 - 2009 1,1 1
Slide 30: New proposal of dividend policy
New proposal of dividend policy PKN ORLEN investment goals and opportunities – new reference point z Proposal of a new reference point for dividend policy – PKN ORLEN investment goals and opportunities z taking into account mergers and acquisitions z allowing for maintaining the optimal capital stru
Slide 31: Agenda
Agenda Strategy Implementation Status Strategy Update Financial Targets Supplementary Slides 31
Slide 32: Comparison of PKN ORLEN macroeconomic assumptions
Comparison of PKN ORLEN macroeconomic assumptions (Strategy – February 2005 v. Strategy Update – January 2006) Exchange rates 1 Refining Refining margin margin (USD/bbl) Exchange rates – – January January 2006 2006 forecasts forecasts1 (USD/bbl) PLN/EUR PLN/USD Feb-05 Jan-06 5.0 6.0 4.4 4.53 5.64 4.
Slide 33: Extension of the value chain in the Group's petrochemical segment
Extension of the value chain in the Group’s petrochemical segment Refining product Olefin II Aromatics fraction Benzen Aromatics extraction Extract separation Reforming V Toluen Paraxylene Transalkylation Isomerisation separation Benzen Ksyleny PTA Purchased paraxylene Paraxylene Investments 33
Slide 34: Extension of the value chain in the Group's petrochemical segment
Extension of the value chain in the Group’s petrochemical segment Project Project size size Project Project benefits benefits • Proposed capacity of the complex units: • Value creation by entering the rapidly ¾ PX installation - 400 th. tpa developing market of polyesters (PET), ¾ PTA installation -