IntegratedReport2014

PKN ORLEN as Parent Company is a multi-segment entity, appropriately allocated to all operating segments and corporate functions.

ACTIVITY OF CORE COMPANIES BELONGING TO ORLEN GROUP

Structured entities

ORLEN CAPITAL AB

The company’s business is to conduct financial activities aimed to raising funds through the issuance of bonds and other financial instruments for institutional and private investors. ORLEN Capital AB specializes in granting borrowings or loans to group companies and conduct any other activities related to the financial instruments. 

On 30 June 2014 ORLEN Capital AB and PKN ORLEN issued eurobonds with 7-year redemption of approximately of PLN 2,080 million translated using exchange rate as at 30 June 2014 (representing EUR 500 million).The funds obtained by ORLEN Capital through the issue were transferred to PKN ORLEN under the borrowing agreement. PKN ORLEN is the guarantor of the issued bonds by an irrevocable and unconditional guarantee issued to the bondholders of PLN 4,262 million translated using exchange rate as at 31 December 2014 (equivalent of EUR 1 billion). The guarantee was granted for the time of the eurobond issue, until 30 June 2021.

ORLEN FINANCE AB

The company’s business is to conduct financial services trough transactions within the ORLEN Group, including intercompany borrowings and loans, as well as any other financial instruments.

As at 31 December 2014 the Group has issued the guarantee to ORLEN Finance for related parties of PLN 940 million and to the third parties of PLN 852 million.

5.1.  Changes in the ORLEN Group’s structure from 1 January 2014 up to date of preparation of these report

5.1.1. Acquisitions under common control not affecting the financial data of the Group

2014 

As a part of the centralization of environmental services within the ORLEN Group, on 26 June 2014, ORLEN Eko Sp. z o.o. acquired from both ANWIL S.A. and Przedsiębiorstwo Inwestycyjno – Remontowe RemWil Sp. z o.o. – subsidiary of ANWIL, a total of 100% shares of Chemeko Sp. z o.o. The transfer of ownership of shares took place on 1 July 2014. As at 31 October 2014, ORLEN Eko merged with the Chemeko company.

On 31 July 2014, PKN ORLEN acquired 100% of shares of AB Ventus Nafta from ORLEN Lietuva.

On 29 December 2014, a share capital of AB ORLEN Lietuva was increased through the issue of 10,379,678 new ordinary registered shares, a nominal value of LTL 1 each.

The value of the issue amounted to USD 300 million, i.e. LTL 847 million (calculated at the rate from 29 December 2014). The issue price of one share was USD 28.90 which represents approximately LTL 81.62.

The shares from the issue were acquired by PKN ORLEN. The stake of PKN ORLEN in the share capital remained unchanged and amounted to 100%.

Funds from this issue were used to repay debt to the ORLEN Group by AB ORLEN Lietuva.

2015

• On 5 January 2015, a merger between Rafineria Trzebinia S.A. and the acquired companies: Rafineria Nafty Jedlicze S.A., Fabryka Parafin Naftowax Sp. z o.o. and Zakładowa Straż Pożarna Sp. z o.o. The company operates under the new name ORLEN Południe S.A. since 5 January 2015;

• On 19 March 2015 the merger of Baltic Power and Baltic Spark as acquired company.

• On 20 February 2015 the merger of ORLEN Serwice S.A. with ORLEN Automatyka Sp. z o.o. and Przedsiębiorstwo Inwestycyjno-Remontowe RemWil Sp. z o.o. as an acquired companies;

• On 22 January 2015 PKN ORLEN acquistition from Anwil S.A. shares of Przedsiębiorsto Inwestycyjno-Remontowe “RemWil” Sp. z o.o, headquarter in Wloclawek;

• On 5 January 2015, a merger between ORLEN OIL Sp. z o.o and Platinum OIL Sp. z o.o. as the acquired company took place;

5.1.2. Changes in  shareholder structure affecting the financial data of the Group 

Acquisition of shares of Birchill Exploration Limited Partnership 

On 5 June 2014 the ORLEN Group acquired 100% of Birchill Exploration Limited Partnership („Birchill”) shares.

Shares were acquired as an execution of provisions of agreement dated 7 May 2014 concluded between the ORLEN Group’s entity – TriOil Resources Ltd. (“TriOil”) and Bregal – Birchill Investments S.A.R.L. seated in Luxemburg. Acquired shares represented 100% of Birchill’s share capital and 100% votes on the company’s Shareholders Meeting. 5 June 2014 is assumed as a date of taking control (Polish time).

The core business of Birchill is exploration, prospecting and extraction of crude oil and natural gas in Canada. Concluding of the agreement is consistent with the ORLEN Group’s strategy aiming at the development of crude oil and natural gas resource base.

The amount paid for shares by TriOil of PLN 707.4 million was translated using the exchange rate as at 5 June 2014 (representing CAD 255.6 million).

Fair value of the identifiable assets and liabilities of Birchill as at the acquisition date is as follows:

The settlement of executed transaction did not influence the consolidated statement of profit or loss and other comprehensive income due to fair value of net assets recognized in the ORLEN Group was equal to price paid. As a part of the settlement an assessment of completeness and accuracy of identified assets and liabilities acquired in the mentioned transaction as well as to determine fair value of identified assets and liabilities were conducted.

Simultaneously, on 5 June 2014 TriOil and Birchill merger took place. The merger took place by transfer of Birchill’s total assets to TriOil. Taking into account the fact that TriOil possessed 100% shares of Birchill’s share capital, the merger took place without an increase of share capital.

Other changes affecting the financial data of the Group 

In the I quarter 2014, Unipetrol a.s acquired from Shell Overases Investments BV (Shell) 152,701 shares representating 16.335% of Česká Rafinérská share capital. The Group recognized a gain on bargain purchase in other operating income of PLN 180 million, calculated as the difference between the acquired share in equity of Ceska Rafinerska of PLN 263 million, and the purchase price of PLN 82 million. As a result of this transaction, Unipetrol share in the capital of Česká Rafinérská increased to 67.56 %

In May 2014 the ORLEN Group sold to PZU Group shares in ORLEN Medica and in Sanatorium Uzdrowiskowe „Krystynka” as well as in the PROF-MED from ANWIL Group

As a result of this transaction, the Group recognized a gain on these sales of PLN 33 million, in other operating income.

In 2014, PKN ORLEN made a repurchase of non-controlling interests and became the owner of 100 % of shares in: Rafineria Trzebinia – squeezed out of the remaining 13.65% of the shares attributable to the non-controlling interest, ORLEN OIL – acquisition of shares from Rafineria Jedlicze and Rafineria Trzebinia; ORLEN Asfalt - acquisition of shares from Rafineria Trzebinia.

As a result of these transactions, the Group recognized a decrease in equity attributable to non-controlling interest of PLN (72) million and increase of retained earnings by PLN 23 million.

On 3 July 2014 Unipetrol a.s. subsidiary of PKN ORLEN, accepted the offer of an Italian ENI Holding regarding the acquisition of Česká Rafinérská shares, representing 32.445% of share capital of the company. The completion of transaction will have a positive impact on development of Downstream sector.

The total amount of the transaction is estimated for approximately PLN 128 million translated using exchange rate as at 31 December 2014 (representing EUR 30 million). Unipetrol, exercising the pre-emption right, will become the sole owner of Česká Rafinérská. On 19 December 2014, Unipetrol received approval from the Czech Antimonopoly Office for the execution of the above transaction, however on 5 January 2015 an organization, among other of the united independent fuel station operators on the Czech market – SCS - Unie nezávislých  petrolejářů, z.s. filed a compliment to this decision. The effect of above transaction will be recognized after the legally binding decision of Czech Antimonopoly Office.    

Changes in the Group structure are part of the ORLEN Group strategy, assuming the focus on the core activities and allocating the released capital for development of the Group in the most prospective areas - upstream and energy sector.