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    PKN ORLEN and Grupa LOTOS on the final straight to merger

    On June 20-21, Gdynia hosted the 5th edition of the Development Vision Forum. During the event, topics related to the most important challenges facing the Polish economy were discussed. The agenda was devoted to issues such as energy, finance, industry, innovation, maritime economy, and the labor market. PKN ORLEN and Grupa LOTOS have just agreed and signed a merger plan involving transfer of the LOTOS assets to PKN ORLEN. The director of the Strategy and Strategic Products Office of PKN Orlen Karol Wolff spoke about this in the “Economics Report” program.

    The transaction is subject to approval of the share exchange ratio and other terms of the merger by shareholders of both companies at their respective general meetings. Once the process is carried through, it will lead to the creation of a strong multi-utility group pursuing capital projects aimed to strengthen Poland’s energy security and its independence in terms of feedstock supplies.

    What does the merger of Orlen and Lotos mean for Poland?

    “This means that the project to build a multi-energy concern is progressing as planned. A few years ago, we set ourselves the goal of merging PKN Orlen with Grupa Lotos. Such action serves to adapt our energy companies to the challenges they face in connection with the energy transformation. On the one hand, we can see that we have to change our energy systems, on the other hand, we can see how important the security and stability of energy supplies is, especially in the context of the war in Ukraine”, explained the representative of PKN Orlen.

    Will Poland manage to build an advantage on the energy market?

    “After the pandemic, when the demand for oil increased sharply and, on the other hand, sanctions were imposed on Russian oil, the world markets began rapid oil exploration. The new contract for crude oil supplies from Saudi Aramco is certainly a great value for the refinery in Płock. It also allows the efficient operation of the refinery and a stable supply of fuels to our economy ”.

    Does the interest rate increase pose a risk to PKN Orlen?

    “For sure the cost of capital for the company will be a bit higher. However, it is worth to mention tha most of the Orlen Group’s liabilities and loans are not incurred in foreign currencies. Therefore, the increase in the cost of raw materials, steel, and labour costs means that we revise certain investment assumptions and look at investments. We have some goals and we look for new solutions to achieve them. This natural process allows the organization to adapt to external conditions that are beyond the company’s control”, said Karol Wolff.

    When can we expect the fuel prices to drop?

    Wolff assured that PKN Orlen is doing everything possible to keep these prices as low as they could be. “Inflation is due to the fact that after the pandemic, fuel demand has increased significantly, and the supply has in turn been limited by the lack of fuel supplies from Russia. If we consider the Polish market, we must import some fuels. The pricing mechanism makes it possible to attractively encourage importers to deliver them to our market. If we had lower prices, there could be a shortage of fuel because it would not be profitable for importers to simply deliver them. In such situations, the balance would be at risk and the access to raw materials would have to be restricted by limiting sales or other ways”, he added.

    “We assume that fuel prices will return to normal. It is hard to say when it will happen, but we observe that more and more refining capacities appear in Asia and Africa. This certainly affects the global fuel market”, summed up the Orlen representative.

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