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PKN ORLEN moves a step closer to finalising the merger with Grupa LOTOS and PGNiG

Poland’s Ministry of State Assets, PKN ORLEN, PGNiG and Grupa LOTOS have signed a four-party agreement providing for a merger formula that guarantees the stable financial condition of the new strong company and takes into account the needs of all shareholders, including minority interests. The leading role of oil refiner and petrol retailer PKN ORLEN in the transaction has also been guaranteed.

“The plan to merge PKN ORLEN, Grupa LOTOS and the PGNiG Group is a response of Poland’s energy majors to the challenges ahead, facilitating their adjustment to unprecedented market changes,” said Jacek Sasin, Deputy Prime Minister and Minister of State Assets. “Their European peers responded effectively to these challenges already some time ago – precisely through consolidation. PKN ORLEN, as the leader of the process, will create a group that will truly support the country’s development and the creation of new jobs. The Polish economy needs proper management of a single complex production chain with great potential for further growth and use of competitive advantages.”

Under the agreement, the merger will be effected through the acquisition by PKN ORLEN of Grupa LOTOS and PGNiG. This means that, upon the acquisition, shareholders of Grupa LOTOS and PGNiG will acquire new shares in the increased share capital of PKN ORLEN becoming its shareholders. The share exchange ratio and the final, detailed concept of the merger will be subject to analyses, to be carried out by international consultants as well as other entities and additional arrangements between the Ministry of State Assets and PKN ORLEN. The merger is the simplest and quickest legal solution possible for the proposed transaction, which will allow for rapid and complete integration of the assets and businesses and will maximise synergies offered by the merger. Funds thus generated will be used to support the development and transition programmes of the merged group.

“We are getting closer to finalising the merger of PKN ORLEN, Grupa LOTOS and PGNiG,” added Daniel Obajtek, President of the PKN ORLEN Management Board. “We are creating an integrated and diversified fuel and energy group, based on the strengths of each company, capable of facing the challenges of the energy transition and international competition. We will skillfully leverage this potential to guarantee long-term profits for the companies and their shareholders, stable energy prices for the Polish economy, an attractive package of comprehensive services for customers and the development of all employees. The transaction structure that has just been confirmed will ensure liquidity for the new group, thus enabling the effective continuation of the existing projects and investment in other promising business areas, such as offshore and onshore wind energy, energy storage and advanced hydrogen technologies.”

As a result of the merger, a group will be formed with total annual revenue of approximately 200 billion złoty (44.2 billion euro) and diversified EBITDA, estimated at approximately 20 billion złoty (4.4 billion euro). This means that in terms of capitalisation and financial results, the strong Polish multi-utility company will match or even exceed the potential of its European competitors.

The transaction and the resulting economies of scale will directly translate into improved energy security of Poland. The merged group will enjoy a significantly stronger bargaining position in its dealings with trade partners from the US, the Middle East and Russia. The exchange of experience in crude oil, natural gas and electricity trading, both at the wholesale and retail levels, will enable the new entity to develop best practices and increase profits in the long term. Cost optimisation in these areas will translate directly into greater stability of energy prices, including fuel prices.

“Grupa LOTOS will contribute to the new concern primarily its unique capabilities in the development of hydrogen technologies, but also in oils and lubricants and railway logistics,” underlined Zofia Paryła, President of the Management Board of Grupa LOTOS. “The merger with PKN ORLEN and PGNiG will guarantee our further dynamic growth, which will enable us to develop our existing projects and pursue new investments. Only as one strong entity will we be able to meet the challenges of the energy transition. We know our strengths and we want to use them to build the value of the new group and thus build Poland’s energy security.”

The merger of PKN ORLEN, Grupa LOTOS and PGNiG will provide also a stimulus for the development and further diversification of the offering for customers. Considering all the ongoing and completed acquisitions, PKN ORLEN is able to introduce a single bill bundling fuels, gas, and electricity. For customers, it will be more convenient, but will also save time. Moreover, access to a database of millions of individual customers of the merged companies will provide great potential for further development of the VITAY loyalty programme based on a range of comprehensive services.

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