President of UOKiK to consider PKN ORLEN’s application for the acquisition of PGNiG

‘This is a great success for us. The Commission’s decision is an important step towards obtaining approval for the merger between PKN ORLEN and PGNiG. This is critical in the context of building a strong multi-utility group which will be a significant player on the competitive European market. Based on the combined assets, PKN ORLEN has all the capabilities to play the leading role in this project, which is of strategic importance to Poland’s economy. The merger is also important in the context of energy transition, which requires energy groups to adopt a new approach to value chain management, for instance to integrating gas-fired generation sources and renewable energy sources. Financial strength to secure the financing for investment projects, including construction of new gas-fired generating units or offshore wind farms, will also play a crucial part. That is why we are making major investments and acquisitions, and we will act as the leader in this project. The merger of PKN ORLEN with PGNiG and Lotos is an immense and unique growth opportunity for the companies, their shareholders, as well as employees and customers,’ said Daniel Obajtek, President of the PKN ORLEN Management Board.
 
Following the integration of PKN ORLEN, Energa, LOTOS and PGNiG assets, the total annual revenue of the new group would reach some PLN 200bn, with EBITDA of its key segments close to PLN 20bn a year. The combined entity’s operating profit would continue to be driven in approximately 40% by the core business activity, namely the refinery and petrochemical operations, while the upstream segment, with a total annual output of approximately 70 million boe of oil and gas, would account for about 20% of the group’s EBIT figure. Retail sales of fuels, gas and energy as well as the regulated distribution business would each generate some 15% of the total figure, with a strong growth potential in the following years. Lastly, the power generation segment would contribute about 10% to operating profit, but that figure could be doubled by 2030 through the delivery of new capital projects.

Completion of the procedure of acquisition of PGNiG by PKN ORLEN before the competent anti-trust authorities was provided for in the Letter of Intent signed on July 14th 2020 between PKN ORLEN and the State Treasury. The transaction model and schedule will be determined by a team representing all its parties. PKN ORLEN’s role as the transaction leader will be central to that process.
 
PKN ORLEN’s transactions are in keeping with prevailing global trends. Major global fuel companies have long built integrated value chains based on oil and gas production, state-of-the-art power generation, and expansion of their retail muscle. For example, BP, Total, Shell and Equinor have implemented segment-based management models, with the highest priority given to diversified revenue sources. Having successfully closed the acquisition processes, PKN ORLEN will also leverage and reinforce its existing segment-based management system.
 
The ORLEN Group’s plan is to become a business leader of the energy sector’s sustainable transformation in the CEE region. In the upstream segment, the consolidation would enhance the combined entity’s operational efficiency and capacity to deliver capital investment projects, enabling it to focus on natural gas and crude oil deposits in Poland and Europe. In the case of power generation, an integrated portfolio would be created in Poland based on high-efficiency gas-fired generating units and renewable energy sources, including offshore wind power generation. In this context, the balancing potential of gas-fired units to offset the irregular generation profile of renewable energy sources would play a vital role. At the same time, a wide-ranging portfolio of assets under the group’s management would optimise wholesale trading in electricity.
 
The creation of an integrated group would enable PKN ORLEN to fully tap the potential of its employees and to raise their competencies. In the current market reality, there is a noticeable shortage of workforce, especially in the manufacturing sector. After the consolidation, the group’s total headcount would exceed 60 thousand.
 
The ORLEN Group has an extensive track record in acquisitions, not only in Poland but also on a global scale. Over the years, companies such as ANWIL of Włocławek, Unipetrol of the Czech Republic, ORLEN Lietuva of Lithuania, and Energa have joined the ORLEN Group. Each of these acquisitions has spurred the company’s growth by building specific competences, reinforcing its position in the region, and leveraging the workforce potential.
 
The ORLEN brand enjoys strong recognition throughout the region, driven by solid relations forged by the Group with its customers, employees and partnering institutions. PKN ORLEN is also seeking to enhance its global brand recognition through a co-branding process currently under way within the European network and through sports sponsorship. This is a well-thought-out strategy aimed at building lasting relations with the Group’s customers and business partners.