PKN ORLEN about to close the largest transaction on Poland’s energy market
27-04-2020  PKN ORLEN’s consolidation with Energa Group

​Within no more than four months PKN ORLEN fulfilled all conditions precedent to the acquisition of the ENERGA Group, including reaching the threshold of 66% of shares covered by the tender offer. The price was eventually set at PLN 8.35 per share. The share acquisition process by PKN ORLEN has begun today. It is an important component of PKN ORLEN’s strategy to create a strong multi-utility group which will strengthen the competitive and financial position of both companies, improve Poland’s energy security, and in particular stimulate the Polish economy.
 
“PKN ORLEN views the acquisition of the ENERGA Group as a strategic and long-term investment. By combining the potentials of the ORLEN Group and ENERGA we are creating a business with a high investment capacity. Our strength will support the Polish economy, which in these difficult times needs an additional impetus to return to the condition from before the coronavirus epidemic,” says Daniel Obajtek, CEO and President of the PKN ORLEN Management Board. By taking over the ENERGA Group, ORLEN is taking a major step towards becoming a multi-utility. We are diversifying our business and building international presence. In the first place, we seek to generate positive effects for the two companies and to support the entire industry in the face of the challenges it is facing. Many European energy companies have already completed their consolidation processes,” adds Mr Obajtek.
 
“Consolidation of state-owned companies is the right direction to follow. We need to create large, strong entities which, after combining their investment budgets, will be able to carry out bold and ambitious projects, successfully develop their business and compete on the European and later also on the global market. In addition, their strength will give new energy to the Polish economy, which must quickly return to the growth track. PKN ORLEN understands that and works towards achieving this goal,” says Jacek Sasin, Deputy Prime Minister and Minister of State Assets.
“The acquisition of ENERGA by PKN ORLEN is the largest transaction in the energy sector in Poland. We are catching up with Europe, where many energy companies have already consolidated, with the support of their countries’ governments. Also we support our companies. Creation of multi-utility national champions which can become major players in Europe and worldwide is part of this government’s economic policy,” stresses Mr Sasin.
 
PKN ORLEN announced a tender offer for all shares in Grupa ENERGA on December 5th 2019. The offer was originally intended to close on April 9th 2020. Given the situation caused by the coronavirus epidemic, on March 26th 2020 the deadline for tendering Energa shares was extended to April 22nd 2020. The transaction was unconditionally cleared by the European Commission on March 31st 2020. The price per share of the Gdańsk-based company in the tender offer was increased on April 15th 2020 from PLN 7 to PLN 8.35. On April 18th 2020, an agreement was signed with the State Treasury on continuation of the ENERGA Group’s strategic investment projects and maintenance of an employment policy ensuring proper functioning of the Group’s companies. The last condition precedent, i.e. reaching the 66% threshold of the shares covered by the tender offer, was fulfilled on April 20th 2020. Based on information provided by Powszechna Kasa Oszczędności Bank Polski – the Brokerage Office of Warsaw, i.e. the entity acting as the tender offer agent, the transactions executed in the tender offer covered ENERGA shares representing approximately 80% of the company’s share capital and approximately 85% of the total number of votes at its General Meeting. The number of shares that PKN ORLEN will eventually acquire in connection with the acquisition of the ENERGA Group will be known on April 30th 2020.
 
Becoming part of an integrated corporate group presents an excellent growth opportunity for the ENERGA Group. Establishing multi-utility businesses 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. The example of a state-controlled multi-utility is Italy‘s ENI. The company is currently the largest company in Italy and one of the leading integrated oil and gas producers in the world. The Polish equivalent of this kind of player would be a company combining ORLEN, LOTOS and ENERGA.
 
The combined business will have an even greater investment potential. In accordance with the declaration made in agreement with the State Treasury, PKN ORLEN will continue the strategic projects of the Gdańsk-based group, with the proviso that the terms on which they will be continued will be subject to a review.
At the same time, the Company plans to further develop the areas in which ORLEN and ENERGA are already active (e.g. electromobility), but also to take on new projects, such as offshore wind farms.
 
The transaction closing will help to better leverage the potential of both companies. 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 main competitors. For PKN ORLEN, this is an interesting RES portfolio complementing its conventional assets such as the CCGT units in Płock and Włocławek.
 
The deal will also facilitate the utilisation of PKN ORLEN’s existing surplus output by the ENERGA Group. This in turn will help reduce operating expenses related to electricity trading on the Polish Power Exchange. What is more, combining the customer bases of both groups will create the cross-selling potential (especially among smaller customers).
 
The acquisition of the ENERGA Group by PKN ORLEN will benefit not only the two companies and the Polish economy. The region of Pomerania and its residents will be among the key beneficiaries of the transaction. Thanks to the planned investments, the number and size of orders will increase. From the tax point of view, the ENERGA Group will remain fully separate, which means continued and higher payments to the regional budget, and thus greater opportunities for the development of the region.

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