EGM of UNIPETROL appoints new Boards

The Extraordinary General Shareholders Meeting has introduced changes to the Supervisory Board. The Supervisory Board comprises 7 representatives of PKN ORLEN: Mr Igor Chalupec, President and Chief Executive Officer of PKN ORLEN S.A.; Ms Joanna Chmielewska, Head of Legal Department of PKN ORLEN S.A.; Mr Dariusz Formela, Head of Organization and Restructuring Office; Mr Piotr Kearney, Head of Strategy Office; Mr Wojciech Lorenc, Human Resources Manager; Mr Cezary Smorszczewski, Vice President, Chief Investment Officer (CIO) and Mr Paweł Szymański, Member of the Board PKN ORLEN Chief Finance Officer (CFO).

The Extraordinary General Shareholders Meeting appointed 2 new independent members: Mr Miroslav Gregr, former Deputy Prime Minister and Minister of Industry and Trade Minister of Czech Republic and Mr. Vlastimil Ruzicka, Rector of the Institute of Chemical Technology Prague.

In the Supervisory Board there are still 3 current members: Mr Zdenek Cerny, Chairman of ECHO Trade Union; Prague; Mr Milan Kuncir, Technical Director of UniRaf and Mr Miloslav Suchanek, Professor of the Institute of Chemical Technology. The new Supervisory Board during its first meeting appointed Mr. Igor Chalupec to the position of Supervisory Board Chairman and Mr. Miroslav Gregr to the position of Supervisory Board Vice Chairman.

The Supervisory Board of UNIPETROL has introduced changes to the Board of Directors. Mr Pavel Svarc has remained as the President and Chief Executive Officer UNIPETROL, a.s. The Supervisory Board of UNIPETROL appointed the following persons to the Board of Directors: Mr Marek Mroczkowski, Vice Chairman, Chief Financial Officer; Mr Vit Subert, Vice Chairman responsible for Human Resources; Mr. Frederik J. Emich, Board Member in charge of retail and Mr Adam Zyczkowski, Board Member, Chief Merger Officer.

According to the current Articles of Associations of UNIPETROL, the Board of Directors consists of five persons. Ultimately, after the amendment of UNIPETROL’s statute, the Board of Directors will be enlarged by four other members responsible for business segments (refining, petrochemicals, chemicals) and investments. 

These changes are a reflection of new shareholder structure of UNIPETROL as well as “single firm” enabling effective management despite the complex structure of the holding. This concept assumes one management team with common objectives and shared responsibility. The new governance structure creates a basis for the introduction of the segment management model at UNIPETROL Group.

The management selection process was transparent and in line with best practices. The procedure of selecting managers for specific positions assumed three sources of candidates: UNIPETROL, PKN ORLEN and external candidates. The candidates were assessed by renowned HR advisors – Kienbaum and Russell Reynolds. The new management team of UNIPETROL has high qualifications and extensive professional experience. The selected managers will also get the opportunity for further professional growth – including career development within the integrated PKN ORLEN Group’s structures.

The election of these new members to the statutory bodies of UNIPETROL and transparent governance model guarantee to the shareholders the leadership team, which is committed to the achieving PKN ORLEN Group's declared strategic goals, including the financial target – return on investments (ROACE) at the level of minimum 17.5% by the year 2009. The management of UNIPETROL and PKN ORLEN initiated a new project, called Partnership Program, with the aim of integrating the operations of the two companies.

The Boards of Directors of PKN ORLEN and UNIPETROL have made a decision to establish an integrated team of best specialists, whose responsibility will be to manage integration process as well as to identify and plan implementation of stand-alone improvements and synergies. The Partnership Program will be lead by the Steering Committee composed of board members of UNIPETROL and PKN ORLEN and operationally managed by the Integration Office.

In total approximately 150 employees of PKN ORLEN are involved in the integration process, 50 out of whom have been delegated to work in the Czech Republic. The opportunities identified within Partnership Program will constitute PKN ORLEN`s value enhancing equity story which will be presented to the public and investors in September 2005.

The integration management model enables the partners to commence the joint daily work and co-operation immediately in order to create strong, regional oil group. PKN ORLEN and UNIPETROL have a unique position in the fast growing Central European oil sector, with market leading positions in Poland and Czech Republic. Both companies have extensive value creation potential and are ready to expand further in the region.

The integration of UNIPETROL and PKN ORLEN creates one of the biggest - and in some categories the biggest - player in the fuel industry in Central Europe. PKN ORLEN and UNIPETROL are jointly first according to the number of fuel stations among its regional competitors and are comparable with the biggest players in the region with respect to other categories.

Mr Igor Chalupec, the new Supervisory Board Chairman of UNIPETROL, a.s., commenting on the integration, said:
 - These undertaken activities illustrate our determination to realize our ambitions and take advantage of the significant market opportunities and challenges that currently exist. We strongly believe that the formation of the focused team, together with both companies` experience and strong positions, will enable PKN ORLEN Group to continue growth, deliver shareholder value and fulfill our mission – to become the regional leader."

Information on UNIPETROL share purchase transaction finalization In order to fully complete the transaction, PKN ORLEN will have to fulfill its obligations towards the Czech Government and minority shareholders of UNIPETROL and its listed subsidiaries. The privatization agreement includes the clause that the final price can rise 15% or fall 25% if the value of the UNIPETROL stake changes by the time the deal is closed. The price adjustment will take place only when the difference between net asset value of UNIPETROL at the end of 2003 and end of May 2005 is bigger than 5%. A reputable audit firm will value the assets of UNIPETROL Group, which will serve as the basis for the price adjustment.

PKN ORLEN is obliged to launch a Mandatory Tender Offer (MTO) to acquire the stakes of minority shareholders in UNIPETROL, SPOLANA and PARAMO. The MTO price will be based on fundamental valuation conducted by an independent expert and on average share price during 6 months before transaction closure. The MTO has to take place on July 25th, 2005 the latest. PKN ORLEN will make a motion for a four-week duration of MTO.

Taking into account the need for capital restructuring of the holding and in line with agreements concluded with our partners during privatization process, PKN ORLEN SA is planning to sell selected assets. The potential divestments would cover contemplated sale of up to 1/3 of fuel stations to ConocoPhillips. PKN ORLEN and ConocoPhilips will be choosing the stations in turns: PKN ORLEN chooses 2 stations, then ConocoPhilips picks one.

PKN ORLEN is also planning to conduct contemplated sale of selected assets to Agrofert – mostly related to fertilizer and other agricultural chemicals production that are outside the strategic area of PKN ORLEN. The conditions for all transactions will be supported by independent valuation opinions prepared by reputable auditors or investment banks.