Release of the Report “Multi-Energy ORLEN. The Company’s Growth from 2016 to 2023”

Warsaw, Masovian 00-502
Poland

“Since the commencement of my mission at the ORLEN Group, I have operated under the steadfast belief that mediocrity is not an option. I can now proudly say that, through collective efforts, we have successfully secured our place as a fully-fledged member of the premier league of Europe’s major players,” declares Daniel Obajtek, CEO and president of the management board of ORLEN S.A., in his introductory remarks to our latest report titled “Multi-Energy ORLEN. The Company’s Growth from 2016 to 2023.” In this comprehensive publication, ORLEN delineates its key initiatives and triumphs over recent years, which have been instrumental in achieving our strategic objective: the establishment of Central Europe’s largest fuel and energy group, with diversified operations, a robust business model, and the capacity to execute billions of euro worth of energy security and transition projects across the region.

In recent years, the ORLEN Group has taken on the challenge of merging several companies crucial for the energy security of Poland and the region. The successfully completed mergers with Grupa LOTOS, PGNiG, and Energa have laid the foundation for building a strong, multi-energy group with diversified operations - ranging from upstream activities to crude oil processing and energy production, and up to comprehensive wholesale and retail business. This growth trajectory has also been consistent with the global trends of moving away from energy production based on a single fuel towards a more sustainable mix, with a predominance of renewables.

As a result of these mergers, ORLEN has evolved into a corporate group with a potential comparable to that of other leading European companies in its sector, such as Repsol or ENI. In the S&P Commodity Insights Top 250 Global Energy Company Rankings for 2022, which included the largest 250 energy companies globally, the ORLEN Group ascended from the 60^th to the 37^th position. In last year’s edition of the prestigious American Fortune magazine’s list of the largest 500 companies in the world by revenue (Fortune Global 500), ORLEN ranked 216^th, surpassing corporations such as Airbus, IBM, or Bayer, a significant improvement from the 454^th position in 2015. Moreover, in the Fortune 500 Europe, announced for the first time in November 2023, ORLEN was placed 44^th, making it the highest-ranked Polish company.

ORLEN is also the first fuel and energy company in Central Europe to have committed to achieving carbon neutrality by 2050. To deliver such an ambitious objective, substantial investments are essential. The scale of the capital projects undertaken by ORLEN in this area is best illustrated by figures alone - in 2016, the Company’s capital expenditure amounted to approximately PLN 4.7 billion, rising to PLN 19.7 billion in 2022, and standing at PLN 20.4 billion after the first three quarters of 2023.

The growth of the ORLEN Group goes hand in hand with the increase in raw material and fuel security for Poland and the entire region. It was thanks to the completed mergers and effective building of business relations across the globe, among other factors, that we were able to maintain stable supplies of fuels and energy to customers throughout the pandemic and following the outbreak of war in Ukraine. During this time, we broke away from the Company’s legacy dependence on Russian crude oil, which as recently as 2015, accounted for nearly 100% of the oil reaching the ORLEN Group’s refineries. Our current import portfolio is well diversified, including crude oil supplies from the North Sea, West Africa, the Mediterranean, the Persian Gulf, and the Gulf of Mexico.

Additionally, we have successfully diversified natural gas supplies to Poland. In 2015, deliveries from Gazprom represented close to 90% of PGNiG’s gas imports. A mere year later, in 2016, the first shipload of liquefied natural gas from a different source arrived at the President Lech Kaczy?ski LNG Terminal in ?winouj?cie on the Baltic Sea. Since then, LNG has accounted for a steadily growing share of imports, and in 2022 it became the main source of gas for Polish consumers. In the same year, the Baltic Pipe gas pipeline was launched, connecting Poland with the Norwegian Continental Shelf, where ORLEN has extensive hydrocarbon production operations. As a result, since 2023 Poland’s economy has been fully independent of oil and gas supplies from Russia.

The key to successful business development lies not only in ensuring stability but also in the readiness to embrace state-of-the-art technologies and solutions. Over the last eight years, ORLEN has made significant investments in various green energy projects, including offshore and onshore wind power, solar photovoltaics, biogas and biomethane, biofuels, electromobility, and hydrogen. The Group’s capital expenditure in 2023-2030 is planned to reach a total of PLN 320 billion, of which as much as 40% will be allocated specifically to carbon emission reduction projects, i.e. the development of renewable energy assets. In 2023, the ORLEN Group made a final investment decision on the construction of Poland’s first offshore wind farm, Baltic Power, which by 2026 will achieve the capacity to feed nearly 1.2 GW of clean energy into the country’s power grid, sufficient to meet the demand from 1.5 million households. Furthermore, to ensure the availability of adequate installation infrastructure for the offshore industry, the Company has also begun the construction of a dedicated installation terminal in ?winouj?cie.

“After completing the series of mergers in February 2023, we revised our ORLEN2030 strategy, stepping up capital expenditures from PLN 140 billion to PLN 320 billion. One of the pillars of the ORLEN Group’s future will be green projects supporting our journey towards net zero. We plan to spend PLN 120 billion on those initiatives by 2030. ORLEN is at the forefront of the energy transition, which is essential for maintaining the competitiveness of Poland’s economy. At the same time, while effectively implementing our ambitious investment strategy, we remain committed to sharing profits with the shareholders,” said Daniel Obajtek.

In 2023, ORLEN distributed a record dividend of PLN 6.4 billion. This enhanced capacity for profit sharing is one of the outcomes of the process of building a multi-energy group.

In recent years, the ORLEN Group has also progressively strengthened its position in the biofuels segment. In 2018, it adopted the “Biofuels Programme”, which aims at a tenfold increase in the Company’s biofuel output - to 3 million tonnes by 2030. More than PLN 15 billion has been earmarked for achieving this target. ORLEN’s biofuel projects, which are sited in Poland and the Czech Republic, contribute to job creation and stabilising demand for farming produce used as feedstock.

In building a robust multi-energy group, ORLEN engages in new business activities while honoring its roots. Accordingly, in 2021, the expansion of the P?ock Production Plant’s Olefins III complex was commenced, representing the largest petrochemical investment project in Europe in the last 20 years. Once upgraded, the facility is expected to contribute approximately PLN 1 billion PLN to ORLEN’s annual operating profit and, thanks to the application of state-of-the-art technologies, to help reduce carbon intensity - ultimately by up to 30% per tonne of output. The Olefins III complex expansion project is slated for completion in 2027, positioning ORLEN as a likely leading player in the regional olefin market, controlling about 40% of olefin production capacity in the region.

Over the last eight years, the Group has also been intensively developing its retail segment. In line with our strategy, we aim to boast a portfolio of at least 3,500 modern service stations operating under the ORLEN brand across Poland and the wider region by 2030. As a result of numerous investments and acquisitions, including the takeover of Austria’s third-largest network of retail fuel assets, we have already achieved more than 98% of this target.

Following the rapid upscaling of our operations and thanks to our unwavering commitment to investments, the ORLEN Group has become the largest taxpayer in Poland, contributing billions of z?oty to the state budget. “I take pride in highlighting that ORLEN stands as the foremost corporate income tax contributor in Poland. Our tax liability for 2022 amounted to a substantial PLN 4.37 billion. Just under a decade ago, in 2016, this figure stood at PLN 1.14 billion. This serves as compelling evidence of the positive trajectory we are on. In the first six months of 2023, the Group paid PLN 36.5 billion in various charges and dues to the state budget and local governments. This money contributes to the modernisation and ongoing enhancement of the living standards of citizens throughout the country,” notes Daniel Obajtek in the latest report.

Another effective tool supporting our Group’s business objectives is its sponsorship activities. In recent years, ORLEN has collaborated with professional athletes and para-athletes and engaged in initiatives dedicated to improving the conditions for practising sports for a total of 300,000 children and young people. Moreover, the Company has partnered with cultural institutions and sponsored important community projects.

To access the entire report “Multi-Energy ORLEN. The Company’s Growth from 2016 to 2023”, please visit: orlen.pl/multi-utility-orlen-report