ORLEN sells crude oil stocks valued at PLN 1.2bn
PKN ORLEN and Ashby sp. z o.o. entered into agreements for purchase of crude oil and for accumulation and maintenance of mandatory crude oil stocks. The purchase of crude oil from PKN ORLEN is being financed by The Royal Bank of Scotland N.V., HSBC Bank Plc., Bank of Tokyo-Mitsubishi Ufj (Holland) N.V. and Bank Polska Kasa Opieki S.A.
Under the agreements, Ashby sp. z o.o. of Warsaw, a company owned by RBS Polish Financial Advisory Services Sp. z o.o., a subsidiary of Royal Bank of Scotland N.V., purchased approx. 500 thousand tonnes of crude oil from PKN ORLEN and agreed to maintain for PKN ORLEN the same volume of crude oil as mandatory stocks. At the same time, PKN ORLEN guaranteed that the crude oil would be stored at the same facilities as previously. The purchase price was determined based on market prices, while the repurchase price was secured under a forward contract.
“This is a third transaction of this kind, designed to reduce the strain on the Company’s balance sheet resulting from the obligation to create mandatory stocks. We are all the more satisfied as the transaction was finalised despite the unstable macroeconomic environment, which reduces access to financing sources by our partners. We still remain the pioneer on the Polish market with respect to this unique solution, which effectively reduces the level of capital employed by the Company," said Jacek Krawiec, President of the Management Board of PKN ORLEN.
As was the case with the earlier agreements, the contract with Ashby sp. z o.o. was executed upon receiving clearance from the Material Reserves Agency.
As the Company informed during the conference devoted to its Q4 2011 performance, it carried out asset impairment tests in compliance with the requirements of International Accounting Standards (IAS 36). As a result, in the ORLEN Group’s consolidated financial statements, impairment losses on tangible assets were recognised, totalling PLN 1.8bn (6% of the aggregate net assets value) for the entire 2011. The impairment losses related mainly to tangible assets owned by PKN ORLEN subsidiaries, including the PVC production business line (impairment was recognised at Spolana, a Czech Republic-based member of the Anwil Group, and at Anwil S.A.), petrochemical assets of RPA in the Czech Republic, and refining assets of Paramo (member of the Unipetrol Group).
In the separate financial statements of PKN ORLEN S.A., an impairment loss of over PLN 1.5bn was recognised with respect to ORLEN Lietuva shares. This impairment had no effect on the consolidated performance of the ORLEN Group, because it was eliminated on consolidation. Following recognition of the loss, the value of ORLEN Lietuva shares in the separate financial statements of PKN ORLEN S.A. amounted to PLN 5bn, and approximated the value of ORLEN Lietuva’s equity as disclosed in the consolidated financial statements. Despite the loss, PKN ORLEN S.A. recorded a net profit of nearly 1.4bn for 2011. The Management Board of PKN ORLEN has recommended to shareholders that the entire net profit be allocated to statutory reserve funds.
“The impairment losses recognised with respect to some of the Group members’ assets reflect the deteriorating macroeconomic conditions and poorer growth prospects in the wake of the second wave of the global economic crisis. The impairment losses do not result in an outflow of cash and as such do not affect the Group’s financial position,” said Sławomir Jędrzejczyk, Vice-President of the Management Board of PKN ORLEN, CFO.
The standpoint taken by the Management Board with respect to dividend payment follows from the long-term development strategy, providing for key investment projects in the upstream and power generation segments, which are expected to drive future growth of the ORLEN Group’s value.
