ORLEN Group’s 2030 Strategy – before update

The Group’s transformation into a multi-utility powerhouse will be based around renewable energy and gas-fired power generation, efficient low-emission refining and petrochemical production, upstream production of hydrocarbons, and an integrated retail offering. The Group will actively manage its business portfolio on a capex budget totalling PLN 140 bn by 2030. Most of the capital expenditure will be allocated to segments that best fit in with the Company’s strategic ambitions. Around PLN 85 bn will be allocated to new prospective growth areas, related mainly to renewable energy and advanced petrochemicals, while PLN 55 bn will be spent to enhance the efficiency of the Group’s existing assets.

The strategy incorporates a commitment to the Group’s long-term objective of achieving a net zero carbon footprint by 2050. The Group’s 2030 CO2 reduction targets are 20% less emissions from its existing refining and petrochemical assets and 33%/MWh – from its power generation business. The strategy is expected to drive a two-and-a-half-fold increase in EBITDA, to approximately PLN 26 bn in 2030. The power generation, petrochemical and refining segments will each deliver EBITDA of about PLN 7 bn, while the retail and upstream segments will generate EBITDA of ca. PLN 5 bn and PLN 1 bn, respectively.

The Group’s key growth area over the next decade will be power generation, based mainly on renewables and supported by gas-fired sources. By 2030, the Group intends to achieve 2.5 GW of installed RES capacity, including 1.7 GW in offshore wind farms and 0.8 GW in onshore (wind power and solar PV) sources. The target fivefold increase in RES capacity is based on the assumption that Baltic Power’s ongoing offshore wind farm project, executed through a joint venture partnership, will add up to 0.6 GW to the Group’s generation capacity. The Group will also increase the installed capacity of its modern gas-fired power plants from today’s 1.1 GW to 2.0 GW. By 2030, up to 20% of gas used internally by the Group will be produced from its own reserves. The generation capacity will be supported by the Group’s extensive and modern transmission network, allowing it to reach a broad base of retail customers and generating a steady stream of profits. The Group will also build energy storage facilities on a pilot basis to optimise the costs of electricity distribution.

By 2030, around a half of the Group’s profits from crude oil processing will be derived from the petrochemical business. Expansion of the existing portfolio and entry into new business areas will help entrench the Group’s position as a leading petrochemical producer in Central Europe. ORLEN is set to ramp up its capacities in olefins and other base products. It will also solidify its position in polymers – a business line with attractive growth potential – by extending the value chain and entry into compounding and concentrates. Concurrently, the share of speciality high-margin products (such as phenol and aromatic derivatives) in the Group’s portfolio will grow from 16% to approximately 25%. Recycling and biomaterials will be new branches of the petrochemical segment. By 2030, the Group will expand its recycling capacity (mainly in plastics) up to 0.4m tonnes, while implementing advanced closed-loop technologies.

Until 2030, refining will remain an important segment of the Group’s business. Its transformation will be driven by energy efficiency improvements, increased crude conversion rates and integration with Grupa LOTOS, the Group’s major domestic peer. Expansion of the biofuel and hydrogen fuel output will be another vital driver. Within the coming decade, the Group will emerge as the region’s leading producer of biofuels (including 2G biofuels), with an annual capacity of 2m tonnes. As part of the strategy, work will be continued on the Group’s hydrogen hub projects in Włocławek and Płock, and steps will be taken to launch green hydrogen production.

The strategic vision is to vigorously develop the retail arm, based on the network expansion and significant additions to the retail offering. By 2030, the number of Polish ORLEN-branded service stations operating throughout the region will be at least 3,500. The ORLEN retail network will be expanded mainly on foreign markets, with the share of foreign locations up from the current 37% to 45%. The Group will seek to enhance the availability of alternative fuels, by deploying at least 1,000 EV fast chargers and increasing the sales of hydrogen and LNG/CNG. The Group’s broad, integrated offering of non-fuel products and services will keep attracting new customer groups. Based on the Ruch countrywide chain of newsagents, the Group will expand its store and food service formats beyond service stations, and will also develop its own network of parcel pick-up points and e-commerce services. Integration with the Energa Group will help ORLEN develop comprehensive service centres for both retail and business customers, encompassing fuel and electricity sales as well as distributed energy solutions. Delivery of the initiatives outlined in the strategy will drive a 50% increase in gross non-fuel margin relative to 2019.

Pursuit of the Group’s strategic objectives will also require changes within the organisation. Over the next decade, the Group will spend approximately PLN 3 bn (ca. 3% of its overall capex budget) on research, development and innovation, as a key area of its necessary transformation. The funds will be used to develop the Corporate Venture Capital fund and finance the activities of the ORLEN Research & Development Centre, among other projects. Another essential element will be the digital transformation, driving efficiency gains in production and distribution, helping mitigate the environmental footprint and fostering customer relations. The Group will put in place a new management model, tailored to the scale of its operations and taking into account the ongoing acquisition processes. We will be an organisation relying on knowledge and versatile competences, investing in talent and human capital.

The strategy is also designed to ensure the Group’s stable financial foundations. The Group’s value will be built by profitable investment projects, sustainable funding sources and a robust balance sheet. Having capped its net debt/EBITDA ratio at 2.5x, the Group will align CAPEX plans with its current financing capabilities. It will rely on a balanced mix of funding sources with current cash flows supported by an additional debt capacity. The Group will also resort to alternative funding sources, such as project finance, EU funding for innovation and energy transition projects, and engaging with external partners who would co-fund selected projects. Projects aligned directly with the Group’s carbon neutrality goal will be partly financed through green and sustainable bonds issued on the European capital market.

• Annual LIFO-based EBITDA (before impairment losses) of approximately PLN 26 bn
• Total CAPEX of approximately PLN 140 bn
• Total CAPEX on sustainable development of over PLN 30 bn
• Reduction of CO2 emissions by 20%
• Over 2,5 GW in installed RES capacity
• More than 3,500 service stations and over 1,000 EV fast chargers