Investment in Unipetrol will secure IRR of over 33%.

According to PKN ORLEN´s expectation, the operational improvements in Unipetrol should secure an internal rate of return on investment of at least 33,9% (no provisions), assuming constant 2004 macroeconomic conditions.

Unipetrol plans changes in the management structure, restructuring its existing financing, formulating a joint investment policy with PKN ORLEN and the divestment of its non-core assets in speciality chemicals, agrochemicals and styrenics.

PKN ´s expectations for 2009 and the shift in priorities
"We would like to help Unipetrol to develop a clear strategy for its assets, focusing on the refining, petrochemicals and retail segments," says Igor Chalupec, CEO of PKN ORLEN S.A. Cooperation with Unipetrol has also stimulated internal development within PKN ORLEN. According to Chalupec, the acquisition of the majority stake in Unipetrol is an important step in the execution of PKN ORLEN ´s regional strategy. This acquisition has lead to creation of new strategic goals to be achieved by the year 2009. Investments in new areas and markets will also make the group more efficient and compliment the existing core business.

After PKN ORLEN fully identifies and achieves integration synergies such as through integrated production planning, wholesale optimization and investment planning, the process will continue and may bring other synergies and a different view on priorities. "Capturing additional growth opportunities in refining and wholesale, petrochemicals, chemicals or retail will be at our most interest. For example we will support integration of Spolana and Anwil as well as potential acquiring petrol stations in the Czech Republic," says Cezary Smorszczewski, Vice-president and Chief Investment Officer of PKN ORLEN S.A.

PKN ORLEN anticipates an increase in Unipetrol ´s gross profit (EBITDA) from 304 mil. EUR in the year 2004 to 442 mil. EUR in 2008, under fixed 2004 macroeconomic conditions. The integration will not result only in additional profits for Unipetrol but also in additional value created by these synergies for PKN ORLEN itself. "So far we have concentrated on value creation for Unipetrol shareholders and just started to identify synergies in our company. First quick wins showed improvement of over EUR 24 mil. to be generated in ORLEN," adds Smorszczewski.

New strategies of Unipetrol and development of a Partnership Program
The core business of Unipetrol in the Czech market will be refining, petrochemicals and fuel retailing. Assets eventually to be dropped are the specialty chemicals, agrochemicals, subscale units, old technologies and styrenic businesses. The high value-creation potential is represented by the business units relating to Česka Rafinerska, Paramo, Chemopetrol, Spolana, Benzina and Paramo Trysk.

"Board of Directors of Unipetrol has developed clear strategies for key assets in core businesses. Non core assets should be divested at the market value. In retail segment we consider increasing the network of filling stations and business restructuring leading to the optimization of operational effectiveness and asset utilization. We also believe that an important opportunity exists in consolidation of production planning across the group, as well as obtaining economy of scale by centralizing of purchasing activity" says Marek Mroczkowski, acting Chief Executive Officer and Chief Financial Officer of Unipetrol. In petrochemical segment it is necessary to decide which assets are non-core. The spin-off (or demerger or sale) is complicated by commercial linkages to priority businesses. The chemical business should consider a possible capital transaction between Spolana and Anwil to maximize synergies through a joint commercial approach, production planning, CAPEX and headcount optimization in PVC. Main strategy in retail is to restore capital stability of Benzina as well as to modernize and restructure the existing network.

Unipetrol has developed a comprehensive operational improvement program: the Partnership Program, which was started by and in Unipetrol in June 2005 with EBITDA impact estimated at EUR 138 mil, under 2004 conditions. It will be achieved mainly in the refining segment and through revenue-enhancing initiatives. The program was developed by Unipetrol with commercial support from PKN ORLEN.
Unipetrol also set up a short term plan that will lead the company toward its goals in the year 2005. "Initiatives already implemented include motor fuel sale coordination, replacement of atmospheric gasoil in steam cracker feedstock with naphtha and insurance cost reduction," adds Marek Mroczkowski. "Partnership Program will have a positive impact of EUR 28 mil visible already in 2005 results".

Unipetrol wants to implement stronger performance measuring and motivating systems with clear financial incentives linked especially to realization of Partnership Program goals.
The right example of such personal exchanges between Polish and Czech side is transfer of former manager of Unipetrol Rafinerie company Milan Kuncíř to the position of Chief Executive Officer of ORLEN Oil, a member of PKN ORLEN Group.

The long term goal of Unipetrol is to capture additional growth opportunities and the short term goals will provide that. By the end of 2005 there should be finished introduction of new corporate governance. During years 2006-2007 the Partnership Program will be implemented and the group will expect thorough restructuring.