PKN ORLEN has announced a tender to buy up all shares in the ENERGA Group

‘As declared earlier, we are consistently pursuing our priority goal of building a strong business capable of successfully competing on the international marketplace and resilient to changing macroeconomic factors. Our drive to diversify revenue sources fits in both with our strategic vision and with global trends. It is making the entire Group more immune to macroeconomic pressures, enhancing its operational stability and security. Capital projects to grow all areas of our business as well as acquisitions geared towards maximum synergies are a vital part of the ORLEN Group’s strategy. Our plans to acquire the LOTOS Group and decision to launch a tender offer for ENERGA shares are in tune with these efforts. The power generation segment already accounts for close to 15% of the Group’s EBITDA. Once we have acquired the Energa Group, this share will grow to nearly 30%,’ said Daniel Obajtek, CEO and President of the PKN ORLEN Management Board.

Under the tender offer, the price per ENERGA share has been set at PLN 7. The offer is subject to conditions precedent: PKN ORLEN has agreed to purchase shares tendered in response to the offer on condition that they carry in aggregate no less than 66% of total voting rights. To close the transaction, it would also require antitrust clearance of the intended concentration. A draft of the application has already been submitted by PKN ORLEN to the European Commission, initiating the process of agreeing on its final version. The tendering period is due to commence on January 31st 2020 and to close on April 9th 2020. If either of the conditions precedent fails to be met by that date, PKN ORLEN may decide to extend the tendering period.

The transaction closing would help better leverage the potential of both companies. For years now, the ORLEN Group has been consistently developing its power generation assets. It is now Poland’s fourth largest producer of electricity, with an installed capacity of ca. 1.9 GWe, of which 1.6 GWe is attributable to Polish assets, including two cutting-edge CCGT units located in Płock and Włocławek as well as the Płock CHP plant – the largest industrial facility of its kind in Poland and one of the largest in Europe. The Group’s major growth capex projects include the construction of offshore wind assets with a capacity of up of 1.2 GWe and a solar PV farm in Włocławek.

As for the ENERGA Group, it owns more than 50 RES generation assets, mainly across the hydro, onshore wind and solar PV segments. Renewable sources account for over 30% of the ENERGA Group’s electricity output – a share unmatched by any of its major competitors. In addition, the company has an extensive distribution network with a total length of 188 thousand kilometres, covering almost a quarter of Poland’s territory. With distribution contributing approximately 90% of the ENERGA Group’s EBITDA and being a regulated part of the market, it is a source of stable earnings. Thus, by acquiring the ENERGA Group, ORLEN would gain a large distribution network spanning northern and central Poland as well as a sizeable renewables portfolio, which would play an important part in ORLEN’s plans to invest in offshore wind projects.

If the deal is closed, PKN ORLEN would be able to effectively balance its conventional capacities with renewable sources, while its existing surplus output would be utilised by the ENERGA Group. This in turn would help reduce operating expenses related to electricity trading on the Polish Power Exchange. What is more, combining the customer bases of both groups would increase the cross-selling potential (especially among smaller customers).

The purchase of ENERGA shares would also enhance growth prospects in the segment of electric mobility, where ORLEN has been consistently strengthening its foothold. If the deal is completed, it would expand ORLEN’s EV charging infrastructure and increase its capabilities necessary for growing that line of business. The combined networks of fast EV chargers of PKN ORLEN, the ENERGA Group and the LOTOS Group would make up the second largest infrastructure of this kind, with 133 charging points and good geographical coverage.

The ORLEN Group’s transformation into a multi-utility business is in line with megatrends and efforts pursued by other international oil companies, as diversified revenue streams make a company more resilient to market fluctuations and macroeconomic volatility, creating added value for both customers and shareholders. Regional players competing with the ORLEN Group, such as MOL, OMV and Repsol, as well as international giants including BP, Shell and Total, have already taken this path of business expansion.
ORLEN’s acquisition of the ENERGA Group would also bring tangible benefits to the latter’s staff and local communities. Power industry experts working for ENERGA, who are in extremely short supply on the labour market, would be a valuable addition to the ORLEN Group’s team.

By joining a strong and diversified group with an established international presence, they would gain new opportunities for professional development. In tax terms, the ENERGA Group would remain a fully separate entity, continuing to pay taxes locally where it operates.

The ENERGA Group’s sponsorship policy with its focus on local community support would also remain unchanged. PKN ORLEN is already actively engaged in community support in the region of Pomerania, as best demonstrated by its organising this year’s edition of VERVA Street Racing, Poland’s biggest motorsports event, in Gdynia.​