ORLEN Spolka Akcyjna · GPW:PKN
ORLEN Spolka Akcyjna — PKN Orlen — Investor Day (September 2015)
50 slides from ORLEN Spolka Akcyjna's investor day presentation, Sep 22, 2015
Slide 1: PKN ORLEN Investor and Analyst Day
PKN ORLEN INVESTOR AND ANALYST DAY „We discover and process natural resources Warsaw, September 22, 2015 to fuel the future” 1
Slide 2: Agenda
Agenda Corporate Strategy Strategy Segments Sławomir Jędrzejczyk CFO 2
Slide 3: Pillars of PKN ORLEN Strategy for 2014-2017
Pillars of PKN ORLEN Strategy for 2014-2017 Financial strength Dividend: DPS increase* Value creation EBITDA: PLN 5.1 billion** People Values: ORLEN * DPS, Dividend per Share **The average annual EBITDA LIFO in 2014-2017 3
Slide 4: Financial strength: Flexibility and resilience to market volatility (1/2)
Financial strength: Flexibility and resilience to market volatility (1/2) Foundations Objectives Guaranteed sources of funding (over EUR 4 billion) Financial ratios ― Rating - investment grade Optimal maturity ― Financial gearing - below 30% (average maturity 1Q 2019) ― Net debt/EBITDA LIFO– less th
Slide 5: Financial strength: Strong cash flow (2/2)
Financial strength: Strong cash flow (2/2) Strong cash flow leads financial ratios to low … and offsets mandatory reserves repurchases … levels … Cash outflows, PLN billion Net Mandatory reserves repurchase* 1,1 gearing, % 66% <30% 33% (Jan 2015) 20% Mandatory reserves repurchase* 2,7 (August 2015)
Slide 6: Value creation: Significant EBITDA LIFO improvement (1/2)
Value creation: Significant EBITDA LIFO improvement (1/2) What we have planned for 2014 – 2017… …and what we delivered so far EBITDA LIFO* plan for 2014 - 2017, PLN billion EBITDA LIFO* execution H1 2013 – H1 2015, PLN billion 5.1 +0.4 4.8 +1.6 +2.0 +2.0 3.1 +1.1 +3.1 1.7 Avg EBITDA Total Macro Oper
Slide 7: Value creation: CAPEX focused on growth (2/2)
Value creation: CAPEX focused on growth (2/2) We reconfirm CAPEX set in the strategy… … as well as our growth directions … CAPEX structure by type of investment Development Downstream 2014-2017, PLN billion Value chain enhancement Maintenance Product slate improvement & Regulatory Operational excell
Slide 8: PEOPLE: Key pillar of our strategy (1/4)
PEOPLE: Key pillar of our strategy (1/4) 90 PKN ORLEN stock performance PLN PEOPLE VALUE CREATION ORLEN 1.0 ORLEN FINANCIAL ORLEN STRENGTH 2.0 3.0 2000 2005 2010 2015 8
Slide 9: PEOPLE: Even more important in unpredictable times (2/4)
PEOPLE: Even more important in unpredictable times (2/4) „They hired outstanding people whenever and wherever they found them, often without any specific job in mind. That's how you build the future (…) If I'm not smart enough to see the changes that are coming, they will. And they'll be flexible en
Slide 10: PEOPLE: ORLEN values as a foundation of our culture (3/4)
PEOPLE: ORLEN values as a foundation of our culture (3/4) ODPOWIEDZIALNOŚĆ RESP ONSIBILITY Szanujemy naszych klientów, We respect our customers, akcjonariuszy, środowisko naturalne shareholders, natural environment oraz lokalne społeczności. and local communities. ROZWÓJ PROG RESS Poszukujemy nowych
Slide 11: PEOPLE: Focus on leadership (4/4)
PEOPLE: Focus on leadership (4/4) „Management is doing things right; Leadership is doing the right things” Peter F. Drucker Quotation source: Peter F. Drucker, „The Essential Drucker”, P. F. Drucker - www.centroatl.pt; access date: 18.09.2015 Image source: P. F. Drucker - www.centroatl.pt; access da
Slide 12: Key messages
Key messages Determined to deliver our strategy Well prepared for unpredictable future Seizing the opportunity Focusing on people 12
Slide 13: Agenda: Strategy Segments
Agenda STRATEGY SEGMENTS Downstream – Sales – Production – Energy Upstream Retail 13
Slide 14: PKN ORLEN strategic vision
PKN ORLEN strategic vision Strong position on large and growing markets Retail Strong customer focus Integrated value chain Downstream Downstream Operational excellence Sustainable Upstream development Upstream Modern management culture 2008 … 2013… … 2017… 14
Slide 15: Downstream - Sales
Downstream - Sales Marek Podstawa Management Board member 15
Slide 16: Strong position on large and growing markets (1/2)
Strong position on large and growing markets (1/2) Sales gravity centers located in countries developing ...which offer further growth potential both in fuels... faster than the rest of the EU … Fuel consumption in Central Europe 3,9% 4,1% GDP annual change million t 3,4% % 3,8% 3,6% Poland 2,5% CAG
Slide 17: Strong position on large and growing markets (2/2)
Strong position on large and growing markets (2/2) Key player on home fuel markets... … significant market share in all petrochemical product groups… Actual fuel market share* ORLEN Group’s share in Central Europe production capacity, % % * …brings opportunities to benefit from an extensive value ch
Slide 18: Well balanced channels of trade on attractive markets
Well balanced channels of trade on attractive markets We are selling throught well-balanced channels of trade... ... to attractive markets ... Volume share in respective channels* Retail Others Inland wholesale 22% Ukraine Poland 42% Inland export Rest of 3% 4% Seaborne sales Central 7% Europe** Pet
Slide 19: Modern management culture
Modern management culture Experienced, well trained and highly motivated team PEOPLE „Top Employer” according to sales managers of the largest Polish companies Emphasis on customer relationship CUSTOMERS Supply quality and reliability Unique product offer INNOVATION New business models for fuels, pe
Slide 20: Key strategic directions: Capture value on growing Central European markets
Key strategic directions: Capture value on growing Central European markets Fuel marketing Development of trading competences Expansion to attractive, neighbouring markets Capture higher demand from diminishing grey zone Petrochemicals Continuous business development and extension of value chain; Di
Slide 21: Downstream - Production
Downstream - Production Krystian Pater Management Board member 21
Slide 22: Downstream benefits from favourable market environment
Downstream benefits from favourable market environment Good macro conditions… …with an increase in capacity utilization and sales intensification … Model margin - Downstream USD/bbl Capacity utilisation +4,7 USD/bbl % Refineries 2Q14 1Q15 2Q15 ∆ (r/r) Płock 79% 87% 100% 21 pp Unipetrol 90% 84% 95% 5
Slide 23: Constant efficiency increase mitigates the external risks
Constant efficiency increase mitigates the external risks Risks Business implications Competitive advantages of Downstream Refinery utilization rate in European Union*, % Integration of refinery, petrochemical and energy Weak utilization in 91% assets Europe 78% 78% 84% 84% Leader on the fuel market
Slide 24: Deliveries in 2015
Deliveries in 2015 People Development Effective process of restructuring (4-shift scheme Metathesis Unit (capacity 100 kt/year) implementation) Polyethylene 3 Unit (capacity 270 kt/year) Strengthening the crew competence Visbreaking Unit (capacity 1100 kt/year) Implementation of competition for resu
Slide 25: Value creation drivers
Value creation drivers Energy intensity optimization despite the end of production cycle of main assets Reduction of heat losses Reduction of hydrocarbon losses and own consumption Reduction of energy consumption in technological processes Improvement of white products yield will lead to higher and
Slide 26: Overdelivery of strategic targets
Overdelivery of strategic targets Refinery 2013 H1 2015 2017 EBITDA LIFO by segments 2013 – 2017, PLN billion Processed crude oil (mln tonnes) 27,8 14,8 29,9 93,9 Fuel yield, (%) Energy 77,0 77,8 76,9 Energy consumption 92,4 90,9 86,9 90,1 Petrochemicals** (Solomon index) Petrochemicals 2013 H1 2015
Slide 27: Key strategic directions: Operational excellence - one step ahead
Key strategic directions: Operational excellence - one step ahead People Full commitment from staff at every operational level Further increase of skills and mobility Increasing the level of trusted contractors Development ASAP restore production in petrochemical part in Litvinow Implementation of k
Slide 28: Downstream - Energy
Agenda Downstream - Energy Piotr Chełmiński Management Board member 28
Slide 29: Energy strategy: integrated value in Downstream through innovation and operational excellence
Energy strategy: integrated value in Downstream through innovation and operational excellence STRATEGY INVESTMENT PLAN Modern industrial cogeneration as a source of power and heat for Commissioning CCGT** Płock and production assets CCGT Włocławek New projects based on innovative Modernization of cu
Slide 30: Extensive experience in industrial cogeneration
Extensive experience in industrial cogeneration Key operational data, H1 2015 Total installed gross electric capacity (MWe) 759,5 Total installed gross thermal capacity (MWt) 4 618 Electricity production (GWh) 1 266 (2535*) Heat generation (PJ) 20.8 (41,6*) Source: PKN ORLEN Planned capacity (2017):
Slide 31: Industrial cogeneration proves to be a profitable business
Industrial cogeneration proves to be a profitable business Moderate macro outlook Energy prices forecasted by CERA are to increase PLN / MWe * Energy price Gas price (LHV) in PLN/MWh* in PLN/GJ** Insufficient capacity available will call for new units Regulatory environment will favour clean technol
Slide 32: Industrial cogeneration is roughly twice as efficient as large condensing power plants
Industrial cogeneration is roughly twice as efficient as large condensing power plants Condensing power plant Industrial cogeneration - efficiency - efficiency PETCHEM & REFINERY Lost Power PKN’s unique 50 – Process steam Power competitive 40%* 60%* advantage fumes fumes 35%* 20%* grid steam generat
Slide 33: CCGT Włocławek and Plock: Attractive technology at a competitive price
CCGT Włocławek and Plock: Attractive technology at a competitive price Total budget CAPEX / MWe Revenue structure index* EUR million /MWe index / annum median 0.83 CCGT Włocławek – 0,74 CCGT Płock – 0,6 * Revenue (in index terms) generated by a condensing unit and industrial cogeneration unit respec
Slide 34: Becoming a leader in operational excellence and natural gas cogeneration sector in Poland
Becoming a leader in operational excellence and natural gas cogeneration sector in Poland Flue-gas desulfurization (FGD) CCGT Włocławek CCGT Płock 2015 2016 2017/2018 Compliance with the EU Capacity: 463 MWe (net) Capacity: 596 MWe (net) standards > 2018 Capex: PLN 1.4 billion Capex: PLN 1.65 billio
Slide 35: Key strategic directions: Focus on industrial cogeneration and operational excellence
Key strategic directions: Focus on industrial cogeneration and operational excellence Industrial cogeneration Focus on industrial cogeneration projects utilising synergies with Petchem & Refining segment CCGT Włocławek CCGT Płock Cost efficiency Cost efficiency improvement of existing production ass
Slide 36: Upstream
Agenda Upstream Wiesław Prugar Matt Rees CEO ORLEN Upstream President ORLEN Upstream Canada 36
Slide 37: Global macro environment: While pricing has decreased recently, most forecasts indicate recovery
Global macro environment: While pricing has decreased recently, most forecasts indicate recovery WTI Oil Price History/Forecasts Henry Hub Gas Price History/Forecasts USD/bbl USD/MMBtu 37 * WTI and Henry Hub price forecasts by key investment banks as reported by Bloomberg @ Sep 10, 2015 37
Slide 38: ORLEN Upstream: we aim at continuing growth our presence in Poland and Canada
ORLEN Upstream: we aim at continuing growth our presence in Poland and Canada Poland and Canada are stable markets where geopolitical risk is low Why Canada? – Stable financial system – Favorable tax regime – One of the largest oil and gas resource bases in the world – Highly educated workforce – De
Slide 39: ORLEN Upstream Canada: growth on quality assets
ORLEN Upstream Canada: growth on quality assets Key Features Strong position in proven areas Application of horizontal multi- stage frac technology RLI*: 17 years Key Advantages Highly experienced team Assets with high upside potential Flexible business model enables price challenge absorption Stron
Slide 40: ORLEN Upstream Canada: well positioned for acquisitions
ORLEN Upstream Canada: well positioned for acquisitions Focused land base Running room Key Upside potential screening Leverage existing skillset criteria Right transaction size Gas to liquids ratio Operatorship Focus on the key formations Meaningful position Significant consolidation opportunity Str
Slide 41: ORLEN Upstream Poland: further diversification of assets portfolio
ORLEN Upstream Poland: further diversification of assets portfolio Key Features Continued exploration works in unconventional projects: Lublin Shale (shale gas, focus on areas with higher exploration potential), Mid-Poland Unconventionals (tight gas) Continued exploration and appraisal/development w
Slide 42: Results: operational indicators remain in line with the 2014-17 plan
Results: operational indicators remain in line with the 2014-17 plan, the financial performance is highly affected by the depressed prices Production Production thousand boe per day million boe per year 7.0 5.8 6 3 2014 2015H1 2015** 2017 target Current EBITDA results EBITDA* PLN million PLN billion
Slide 43: Key strategic directions: Project portfolio rationalization in Poland
Key strategic directions Project portfolio rationalization in Poland – focus on the more prospective areas Adjusted development pace in Canada Screening for opportunistic acquisitions in Europe and Canada Focus on cost efficiencies – flexible business model 43 43
Slide 44: The Upstream Team
The Upstream Team FORLEN] We have worked On average each of us ° ° h 18 in 13 countries "at experiance Future fueled by... on 5 continents (236 years in total)... oS ...while 27% of this a time we worked a together for: a St ---people !
Slide 45: Retail
Retail Marek Podstawa Management Board member 45
Slide 46: ORLEN: the power of brand
ORLEN: the power of brand „The Most Valuable Polish Brand” for 8 consecutive … supported by variety of sponsorship activities and years… events… Brand value +52% Volleyball Polish National Team PLN billion Polish National Atletics’ Team Motorsports (Orlen Team and Verva Racing Team) 4,4 Biggest spor
Slide 47: Strong competitive market position
Strong competitive market position Operational performance in line with strategic … with high quality of service … commitments… H1 2014 H1 2015 2017* Customer Service Excellence Star 2014 and 2015 Share in home Petrol Station of the year 2014 markets, % 14,2% 14,4% +2,6pp Fleet Awards for Fuel Card
Slide 48: Further retail development focused on value creation
Further retail development focused on value creation Selective network development… … with significant increase of Stop Cafes… Number of Stop Cafes in Poland Number of stations +15% +3% 2.692 2.682 2014 H 1 2015 2017 … thanks to solid CAPEX for development CAPEX, PLN million Continous retail develop
Slide 49: Key strategic directions: From a solid product supplier to customer experience provider
Key strategic directions: From a solid product supplier to customer experience provider Fuel … … store … Core competence ‚Must have’ for a filling station High quality of fuels and services Convenience and fast shopping Increasing market efficiency Store formats adjusted to market needs … food … … e
Slide 50: ORLEN. Fuelling the future.
ORLEN. Fuelling the future. 50