ORLEN Group posts record 2021 earnings
In 2021, the ORLEN Group reported the highest net profit in its operating history of PLN 11.2 billion, with LIFO-based EBITDA at PLN 14.2 billion, net of the effect of impairment. The largest contributors to the record results were the petrochemical, power generation and refining businesses. In contrast, fuel and non-fuel sales at service stations in Poland accounted for just 13% of the Group’s profit. Despite a marked decline in fuel margins on the Polish market, revenue came in at PLN 131.3 billion. In 2021, the Group consolidated its position and maintained financial ratios at safe levels. A solid financial footing enabled the Group to raise capital expenditures to PLN 9.9 billion and move forward on its zero- and low-carbon energy projects that are strategic for ensuring the energy security of Poland. Consistent efforts have been made to build a multi-utility group, with Grupa LOTOS and PGNiG to join this year.
“Despite the challenging year, we delivered over PLN 11 billion in net profit for 2021, the highest figure on record, unmatched by any Polish company’s performance to date. The result also demonstrates we were right to build a strong multi-utility company and to place a focus on energy generation and petrochemicals, two promising business segments other companies do not have. This gives us competitive advantage. Financial stability allows us to steadily increase investment spending, with almost PLN 10 billion allocated to strategic projects last year. Our capital projects create jobs and drive the economy. We are set to increase our focus on the energy business expansion this year, concentrating on renewables and zero-carbon nuclear technology as these are a guarantee of Poland’s energy security and independence in the long term,” said Daniel Obajtek, President of the PKN ORLEN Management Board.
In 2021, the ORLEN Group reported:
- LIFO-based EBITDA of PLN 14.2 billion, up by PLN 5.8 billion (y/y)
- net profit of PLN 11.2 billion, up by PLN 8.4 billion (y/y)
- revenue of PLN 131.3 billion, up by 52% (y/y)
- sales of 38.9 million tonnes, up by 2% (y/y)
The ORLEN Group consistently diversified its business, strengthening its position and maintaining financial ratios at safe levels in 2021. The Group generated cash flows from operating activities of PLN 13.3 billion and maintained its investment grade ratings: BBB- with a positive outlook from Fitch Ratings and Baa2 with a positive outlook from Moody’s. Net debt decreased by almost PLN 1 billion, to PLN 12.3 billion at the end of the year. PKN ORLEN issued corporate bonds with a total value of PLN 1 billion, as well as EUR 500 million worth of green eurobonds, the proceeds from which will be allocated to finance investments in renewables. This benchmark issue of green eurobonds, blazing a trail not only for PKN ORLEN but the entire Polish market, attracted huge investor interest, with as many as 234 subscription orders placed for a total of nearly EUR 3 billion. This means that PKN ORLEN’s green bonds were six times oversubscribed relative to the planned issue size.
Last year, the ORLEN Group spent PLN 9.9 billion on capital projects designed to increase company value and enhance Poland’s energy security. Consistent implementation of the growth plans across all business lines made it possible, in line with the strategy, to pay dividend for 2020 at PLN 3.5 per share. The same amount of dividend was recommended by the PKN ORLEN Management Board also for 2021.
2021 saw continued implementation of the strategy to build a multi-utility group, which is fundamental to Poland’s energy security, particularly given the current geopolitical situation. As a result of its efforts, in early 2022 PKN ORLEN selected four partners in the process of implementing the remedies negotiated with the European Commission in connection with the acquisition of the LOTOS Group. One of the partners is Saudi Aramco. PKN ORLEN is set to expand its business relationship with the company in the fields of petrochemicals and refining to cut reliance on crude oil supplies from Russia. In 2021, the ORLEN Group also applied to the Office of Competition and Consumer Protection (UOKiK) for clearing the acquisition of PGNiG, and the regulator granted the application in March of this year.
The projects carried out by the ORLEN Group last year aimed to increase profits, enhance the energy security and expand the product range. A strong focus was placed on the development of energy projects, particularly wind power. The Group will be the first to build an offshore wind farm in the Baltic Sea, to be implemented together with Northland Power, its Canadian partner with whom a cooperation agreement was signed in 2021. Poland’s first offshore wind project is to be commissioned by the end of 2026. Last year, the Group partnered with GE Renewable Energy to strengthen its competitive position in securing new licences for offshore wind farms. The Group also engaged in the development of the micro modular reactor (MMR) and small modular reactor (SMR) technologies. Last year, PKN ORLEN entered into a cooperation agreement with Synthos Green Energy and applied to the Office of Competition and Consumer Protection for clearance to set up a joint venture – ORLEN Synthos Green Energy. In March 2022, the application was approved, which opens the way for the new company to develop and commercialise in Poland one of the most efficient, cost effective and safest energy generation technologies.
The ORLEN Group also launched its Hydrogen Eagle programme to put in place an international chain of renewables-powered hydrogen hubs and to build more than 100 hydrogen refuelling stations. Also, PKN ORLEN commenced the construction of an olefins unit, its largest capital project in 20 years. The Research and Development Centre was opened in Płock, and a green glycol unit was placed in service in Trzebinia. Work was underway to build a visbreaker unit and to ramp up the production capacity for nitrogen fertilizers by 50% in Włocławek. The projects will create hundreds of new jobs. In line with its strategy, the Group continued broad efforts to grow its retail business. 400 automated parcel machines were placed in service as part of the ORLEN Parcel service, and a new retail format ORLEN in Motion (retail stores outside the service station chain) was launched. The Group completed the acquisition of 100% of the shares in OTP, Poland’s largest road carrier of liquid fuels.
The petrochemicals segment delivered a record result in 2021, with LIFO-based EBITDA at PLN 4.3 billion, up 86% year on year. This growth was achieved on the back of a year-on-year increase in petrochemical margins on olefins, polyolefins, PTA, PVC and fertilizers, as well as the measurement and settlement of CO2 futures. Sales amounted to 4.9 million tonnes and were down 4% year on year, including by 14% in Poland (mainly in fertilizers and PTA), which was due to shutdown maintenance of the PTA and Reforming 5 units. In Lithuania and in the Czech Republic sales rose by 43% and 18%, respectively, year on year, following an improvement of the performance parameters of the PE3 unit.
The power generation segment once again confirmed its strong position by posting EBITDA of PLN 3.7 billion The Energa Group’s contribution was PLN 2.9 billion. This strong performance was achieved despite an increase in gas prices, and higher lignite prices at Unipetrol in the Czech Republic. The final result was also driven by price relations between energy purchases and resale in the Energa Group, which were partially offset by measurement and settlement of CO2 futures. During the period, the Group had installed power and heat generation capacities of 3.3 GWe and 6.1 GWt, respectively. Electricity output, of which approximately 60% was from zero- and low-carbon sources, totalled 3.2 TWh. Electricity sales were slightly lower compared with the previous year. On the other hand, there was an increase in electricity distribution, due to more employees working from home in Poland. With a view to building new business lines in the power generation segment, PKN ORLEN continued its focus on the development of offshore wind power generation.
The refining segment delivered LIFO-based EBITDA of PLN 3.6 billion, being an effect of a positive impact of macroeconomic factors (year on year) resulting from a higher Brent-Urals differential, increased margins on light and middle distillates, depreciation of the złoty against the US dollar, and the measurement and settlement of CO2 futures. Sales volumes amounted to 24.4 million tonnes, an increase of 4% year on year, including 3% in Poland, 4% in Lithuania, and 5% in the Czech Republic, supported chiefly by improved market and macroeconomic conditions. Sales of gasoline, diesel oil and jet fuel were also on the rise, with lower sales of LPG and HSFO marine fuel. Last year, PKN ORLEN processed 29.9 million tonnes of crude oil, that is 0.4 million tonnes more than a year earlier. At ORLEN Unipetrol, crude throughput expanded by 1 million tonnes and fuel yields rose by 1 pp year on year. ORLEN Lietuva recorded an increase of 0.2 million tonnes and 4 pp in crude throughput and fuel yields, respectively, year on year.
In 2021, the retail segment generated EBITDA of PLN 2.9 billion, down by 10% year on year. The figure reflects a decline in fuel margins on the Polish market, with a concurrent increase in margins generated in the Czech and German markets and relatively unchanged margin levels in Lithuania (year on year). In Poland and Lithuania, the Group recorded higher non-fuel margins, while in Germany and the Czech Republic non-fuel margins went down. Sales of gasoline and diesel oil grew by 1% year on year, with lower LPG sales. At the end of 2021, the ORLEN Group’s retail chain comprised 2,881 service stations, up by 26 stations year on year: 8 more sites in Poland, 4 in Germany, 5 in the Czech Republic, and 9 in Slovakia, with the number of stations in Lithuania remaining relatively unchanged. The Group thus increased its shares in the Czech and Slovak markets. Work continued on expanding the non-fuel product range. The number of Stop Cafe, star Connect and ORLEN in Motion non-fuel sales outlets rose by 72 year on year: by 25 in Poland, 29 in Germany, 14 in the Czech Republic, 3 in Slovakia, and 1 in Lithuania. At the end of December 2021, the outlets totalled 2,290, including 1,750 in Poland, 327 in the Czech Republic, 168 in Germany, 29 in Lithuania and 16 in Slovakia. PKN ORLEN consistently adapted its service station chain to sell alternative fuels. As a result of these efforts, the number of alternative refuelling points increased by 296 year on year, to more than 500. Customers have access to 462 EV charging stations, located mainly in Poland, 2 hydrogen refuelling stations, and 44 CNG stations.
The Upstream segment once again delivered a solid performance, with EBITDA at PLN 387 million, reflecting a positive impact of macroeconomic factors (year on year), driven by higher prices of crude oil, gas and natural gas condensate and a positive effect of cash flow hedges. Average production in 2021 was 16,700 boe/d, including 1,100 boe/d in Poland and 15,600 boe/d in Canada. In Poland, field development work was underway on the Edge project, as well as on the Plotki and Sieraków projects implemented with PGNiG. In addition, drilling work was nearing completion on the Miocene project and commenced on the Płotki project, carried out jointly with PGNiG. As part of seismic surveys, interpretation of the Koczała-Miastko 3D seismic data was completed (the Edge project). In Canada, the drilling of the first well was completed and the drilling of another well began on the Kakwa project. Under the Ferrier project, PKN ORLEN was involved in the drilling of two wells and commenced upgrade work to increase the recovery of hydrocarbons in the southern part of the area.