FINANCIAL CAPITAL
Financial capital represents the available financial resources held currently by the ORLEN Group, obtained from internal or external sources and generated as part of our business.
Key factsabout the capital
Our financial capital includes equity and debt capital, mainly in the form of borrowings.
The capitalmanagement
- Working towards the development of renewable energy and production of advanced petrochemicals, with a simultaneous conversion of existing operations, where innovation and adoption of new technologies is consistent with the long-term objective of achieving carbon neutrality by 2050.
- Further development of the multi-utility structure of the ORLEN Group to maintain the leading role in the energy transition process in Poland and Central Europe.
- Financial stability maintained through measures optimising expenditure and asset structure.
- Financial ratios, especially leverage, maintained at safe target levels.
- Steps taken to strengthen the ORLEN Group’s long-term competitive edge both in Poland and abroad.
- Strong focus on developing existing assets and advancing innovation, which is to help the ORLEN Group preserve a strong competitive advantage in the extremely dynamic environment.
The Group enjoys a stable financial condition, as confirmed by safe levels of debt ratios and Baa2 rating from Moody’s.
Outcomes
As a consequence of changes in the ORLEN Group structure resulting from the acquisition of control of ENERGA S.A., and considering the business development of the ORLEN Group in individual areas and the associated operational decision-making and resource allocation process across the Group, starting from the first half of 2020, the ORLEN Group decided to change the presentation of the Downstream segment, splitting it into three operating segments: Refining, Petrochemicals and Power Generation.
In 2020, the ORLEN Group operating segments delivered LIFO EBITDA1 before net reversal of impairment losses on assets of PLN 12.4bn.
In 2020, net cash from operating activities amounted to PLN 7.2bn and was PLN (2.1)bn lower year on year, mainly due to lower profit before tax (down by PLN (2.5)bn) and higher gains on investing activities (up by PLN (3.9)bn), primarily related to the recognition of a PLN (4.1)bn gain on a bargain purchase of the ENERGA Group.
Net cash used in investing activities in 2020 reached PLN (8.5)bn, having increased PLN (4.5)bn year on year, mainly on the back of growth of PLN (3.3)bn in net cash spent on acquisition and disposal of property, plant and equipment, intangible assets and right-of-use assets.
The adverse impacts of the coronavirus pandemic and an ambitious CAPEX plan aimed at increasing the Group’s value necessitated a downward revision of the dividend payout for 2020 to PLN 0.4bn, or PLN 1.00 per share. In line with the ORLEN2030 strategy adopted in November 2020, we plan to resume the pre-COVID-19 dividend policy, which means paying dividends of at least PLN 3.50 per share and maintaining or increasing the distributions in the coming years.
How financial capitalinteracts with other capitals?
The ORLEN Group’s strategy until 2030 sets the course for the Group’s transformation into a multi-utility group and a leader of the energy transition in the region.
By 2030, the Group plans to spend a total of PLN 140bn on investments. The Group’s growth is based on a diversified portfolio of investments in its existing and future business areas. 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, around a half of the Group’s profits from crude oil processing will be derived from the petrochemical business. These two segments will account for approximately PLN 45–55bn of the planned capital expenditure until 2030. Until 2030, refining will remain an important segment of the Group’s operations. 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. The strategy also provides for vigorous development of 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 ORLEN Group’s strategy envisages prudent expansion of the asset portfolio in the Upstream segment, with a special focus on natural gas reserves and potential restoration of the existing portfolio of production assets after merger with Grupa LOTOS.
As at December 31st 2020, the largest items of the ORLEN Group’s assets were property, plant and equipment and intangible assets, which increased by PLN 18.0bn, to PLN 51.9bn. In 2020, the ORLEN Group’s capital expenditure on property, plant and equipment and intangible assets was PLN 7.9bn, up by PLN 3.8bn year on year.
For more information on financial capital, see ‘Financial results’ .
